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Managerial Economics - The Fundamentals Of Managerial Economics

Nature Of The Firm - The Fundamentals Of Managerial Economics

   Posted On :  28.05.2018 10:08 pm

A firm is an association of individuals who have organized themselves for the purpose of turning inputs into output.

Nature Of The Firm
 
 
A firm is an association of individuals who have organized themselves for the purpose of turning inputs into output. The firm organizes the factors of production to produce goods and services to fulfill the needs of the households. Each firm lays down its own objectives which is fundamental to the existence of a firm.
 
The major objectives of the firm are:
 
1. To achieve the Organizational Goal
2. To maximize the Output
3. To maximize the Sales
4. To maximize the Profit of the Organization
5. To maximize the Customer and Stakeholders Satisfaction 
6. To maximize Shareholder’s Return on Investment 
7. To maximize the Growth of the Organization
 
Firms are established to earn profit, to keep the shareholders happy. To increase their market share, they try to maximize their sales. In the present business world firms try to produce goods and services without harming the environment. Firms are not always able to operate at a profit. They may be facing the operating loss also. Economists believe that firms maximize their long run rather than their short run profit. So managers have to make enough profit to satisfy the demands of their shareholders and to maximize their wealth through the company.

 

 

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