Economics: The study of how people use their scarce resources to satisfy their unlimited wants. Macroeconomics: Study how decisions of individuals coordinated by markets in the entire economy join together to determine economy-wide aggregates like employment and growth.
What Is a Firm?
A firm is a business organization—such as a corporation, limited liability company (LLC), or partnership—that sells goods or services to make a profit. While most firms have just one location, a single firm can consist of one or more physical establishments, as long as they fall under the same ownership and utilize the same Employer Identification Number (EIN). When used in a title, 'firm' is typically associated with businesses that practice law, but the term may be used for a wide variety of businesses including accounting, consulting, and graphic design firms. 'Firm' is often used interchangeably with business, company, or enterprise.
![Household Definition Economics Household Definition Economics](/uploads/1/2/4/7/124710075/980276781.jpg)
Firm
Meaning of 'Firm' in Economics
In microeconomics, the theory of the firm attempts to explain why firms exist, why they operate and produce as they do, and how they are structured. The theory of the firm asserts that firms exist to maximize profits; however, this theory changes as the economic marketplace changes. More modern theories would distinguish between firms that work toward long-term sustainability and those that aim to produce high levels of profit in a short time.
Firms Differ by Type of Ownership
A firm's business activities are typically conducted under the firm's name, but the degree of legal protection—for employees or owners—depends on the type of ownership structure under which the firm was created. Some organization types, such as corporations, provide more legal protection than others. Firms can assume a number of different types based on their ownership structures:
- One type of firm is a sole proprietorship or sole trader. A sole proprietorship is owned by one person, who is liable for all costs and obligations, and owns all assets.
- A partnership is a business owned by two or more people; there is no limit to the number of partners that can have a stake in ownership. A partnership's owners each are liable for all business obligations, and together they own everything that belongs to the business.
- In a corporation, the businesses' financials are separate from the owners' personal financials. Owners of a corporation are not liable for any costs, lawsuits, or other obligations of the business. A corporation may be owned by individuals or by a government. Though business entities, corporations can function similarly to individuals; for example, they may take out loans, enter into contract agreements, and pay taxes. A firm that is owned by multiple people is often called a company.
- A financial cooperative is similar to a corporation in that its owners have limited liability; with the difference that its investors have a say in the company's operations.
Household economics covers the economic analysis of all decisions made by households. The microeconomic foundations of household economics were pioneered by the founders of the New Home Economics (NHE), Gary Becker and Jacob Mincer. All family economics is included in household economics and Becker's Treatise on the Family is therefore a major contribution to both fields. Topics covered include:
- consumption and savings [1]
- labor supply and allocation of time to household production and leisure [2]
- child-related topics: fertility and parental investments in children's wellbeing
- the demand for health (part of health economics)
- intergenerational relations, including bequests and care of older relatives
- household formation via cohabitation, marriage or independent living, including the study of mate selection
- divorce and separation [3]
- marriage-related transfer payments such as brideprice, dowry, alimony, and child support
- financial relations among partners and spouses
- Anti-poverty transfers and labor supply in low-income families [4]
- intra-household risk sharing, crowding out of household insurance by public insurance policies [5]
- macroeconomic applications, including studies related to economic development.
The methods of analyses include market analyses, cost–benefit analyses, experimental analysis, and intra-household bargaining theories.
See also[edit]
![Household Definition Economics Household Definition Economics](http://blog.uvm.edu/uvmsc-specialcollections/files/2015/01/gay11.jpg)
References[edit]
- ^ Mazzocco, M. (2004). 'Saving, Risk-sharing and Preferences for Risk', American Economic Review, Vol. 94, pp. 1169-1182.
- ^ Chiappori, P.A., Costa-Dias, M. and Meghir, C. (2015). 'The Marriage Market, Labor Supply and Education Choice', Cowles Foundation Discussion Paper No. 1994.
- ^ Dickert-Conlin, S. (1999). 'Taxes and Transfers: Their Effects on the Decision to End a Marriage', Journal of Public Economics, Vol. 73, pp. 217-240.
- ^ Chan, M. K. (2013). 'A Dynamic Model of Welfare Reform,' Econometrica, Vol. 81, pp. 941-1001.
- ^Ortigueira, S. and N. Siassi (2013). 'How Important is Intra-household Risk Sharing for Savings and Labor Supply', Journal of Monetary Economics, Vol. 60, pp. 650-666.
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