What is a Firm?

A firm is a business organization that produces goods or provides services to customers in order to earn profit.

Examples:

• A bakery selling bread

• A football club selling tickets and merchandise

• A car company making vehicles

• A software company creating apps

Purpose of Firms

Firms usually aim to:

• Earn profit

• Satisfy customers

• Grow larger

• Compete with other businesses

• Create jobs

• Produce quality goods and services

Types of Firms

By Ownership

Sole Trader

A business owned by one person.

Advantages

• Easy to start

• Owner keeps all profit

• Quick decision-making

Disadvantages

• Unlimited liability

• Limited money for expansion

• Heavy responsibility

Partnership

A business owned by two or more people.

Advantages

• More ideas and skills

• Shared responsibility

• More capital

Disadvantages

• Possible disagreements

• Shared profit

• Unlimited liability in many partnerships

Private Limited Company

Owned by shareholders but not sold publicly.

Advantages

• Limited liability

• Easier to raise money

• Separate legal identity

Disadvantages

• More legal rules

• Harder to set up

Public Limited Company (PLC)

A company whose shares can be sold to the public.

Advantages

• Can raise huge amounts of money

• Large-scale expansion possible

Disadvantages

• Expensive to manage

• Shareholders expect profits

Economic Sectors

Primary Sector

Extracts natural resources.

Examples:

• Farming

• Fishing

• Mining

Secondary Sector

Manufactures goods.

Examples:

• Car factories

• Clothing production

• Construction

Tertiary Sector

Provides services.

Examples:

• Banks

• Schools

• Football clubs

• Hospitals