In general, if the principle of general economics is applied to an industry, it falls under the category of industrial economics.

Economics deals with the study of how an individualor business makes choices to allocate limited available resources in an optimal manner in order to fully satisfy their unlimited wants. Consumers can maximize their satisfaction in this way. In this same economical manner, the goals of profit maximization of producers/industries can be attained.

In economics, we must also study the demand and supply of products in the market, wants and satisfactions, and willingness of the customer to pay for the purchase of any good in the market.

Though each of the projects has its own advantages and disadvantages, the recent phenomenon of budgetary constraints has compelled the planner/policy maker to make an intelligent choice between available alternatives.

Selection of the given project, and allocation of scarce resources is a challenging job and should be performed on the principle of optimality, which is based on the principle of economics or industrial economics (in industries’ cases).

Feasibility studies are comprised of technical feasibility, commercial and financial considerations, economic analysis, socio-economic analysis, and environmental analysis.  These should be fully examined before any final allocation decision is made.

Generally, projects with high benefit-to-cost ratio and positive or more positive net-to-present-value along with low maintenance and operating costs are preferred.

The modern decision-making tool - benefit-cost analysis - examines the overall impact of any investment project (public or private ) on individuals, firms, producers, consumers, organizations, environment, and society.

Economics can be classified as either micro-economics or macro-economics. Micro- and macro- aspects are fundamental features of industrial economics.

Micro-economics deals with the economics of each economic unit such as an industry, a firm, a producer or the factory of a producer.

Macro-economics deals with the analysis of the growth of any nation with respect to income, total demand, total supply, and total investment level, as well as economic conditions of a country as a whole.

Industrial economics is the branch of economics which deals with the economic problems faced by any firm or industry, and their impact on our society.

Industrial economics also provides the information about marginal cost and marginal benefits that are generated by small changes (increase in cost) for an additional unit of increase in production of the good produced.

  General economics plays a vital role in industrial economics as shown below:

  1. It offers guidance in the decision-making processes, in order to choose the best alternative among the number of those available
  2. It provides suggestions to overcome the problems of risk and uncertainty that occur due to unsuitable market conditions and changing government import and export policies

       3. It helps in forecasting the position of raw materials, the rate of factors available for                                production etc.

Objectives - The following are the important objectives of industrial economics:

  1. to achieve the assigned target for the development of industries
  2. to provide information about sources of nature, climate for the industrial growth, supplies for production etc.

 Scope - Industrial economics has very wide scopes which are discussed below:

  • The efficiency of an industry, which can be determined by the function of its production
  • Industrial finance: It has two levels for study - available finance source and effective utilization
  • Industrial location: It gives us information about suitable location for the proposed industrial project layout
  • Determinants of profitability
  • The organization form and its motives
  • Theory of demand (consumer behavior), production (producer’s behavior)
  • Cost analysis
  • Profit analysis
  • Analysis of pricing theory


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