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Economics IGCSEPDF 68
118 pagesrevision 46932
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●
;
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the difference between Total
Revenue and Total Cost (TR-TC)is
greatest.
● Survival: Often the objectiveofnew
or struggling firms. Focusison covering
costs to stayinbusiness. ● Growth:
Increasing thesizeofthe
firm, usually measuredbyrevenue,
market share, or numberof
employees. Growth canleadto
economies of scale andgreater
market power.
● Increase Market Share:Aimingto
increase the firm's proportionofthe
total sales in an industry.Thiscan
give the firm greater influenceover
pricing.
● Social/Environmental Objectives:
Firms may pursue non-financial
goals such as reducing pollutionor
supporting the local community
(Corporate Social Responsibility).
Notes: Forms of Business
Organisation
Sole TraderandPartnership
● Advantages:
Simple to set up;
owner keeps all the profit (sole
trader); quick decision-making; direct
contact with customers.
Disadvantages: Unlimited liability
(a major risk); difficulty raising
capital; owner bears full
responsibility; business ends if the
owner dies or retires.
Private Limited Company (Ltd)
● Advantages:Limitedliability
attracts investment; easier to raise
capital than asole
trader/partnership; greater continuity.
Disadvantages: More complex legal
formalities to set up; cannot raise
capital from the public; accounts
must be published (less privacy).
Public Limited Company (Plc)
● Advantages:Limitedliability
ability to raise very large amounts of
capital by selling shares to the
public; easier to obtain loans.
Disadvantages: Very complex legal
formalities; high cost of setting up;
accounts are fully public (competitor
risk); pressure from public
shareholders for short-term profit.
Notes: Firm Growth (Integration
and Economies of Scale)
TypesofFirm Growth
● Internal (Organic)Growth:
A firm
expands by reinvesting profits,
increasing output, and expanding its
own operations (e.g., building a new
factory).
External Growth
(Integration/Merger): Two or more
separate firms join together.
○ Horizontal Integration:
Firms at the same stage of
production and in the same
industry merge (e.g., two
car manufacturers).
○ Vertical Integration: Firms
at different stages of
production in the same
industry merge.
■ Backward Vertical: A
firm merges with its
supplier (e.g., a car
manufacturer buys a
tyre company).
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