Question

Natures and Scope of Industrial economics Meaning And definitions

Answer 1

Answer:

Industrial economics is a distinctive branch of economics which deals with the economic problems of firms

and industries, and their relationship with society. In economic literature it is known by several names with

marginal differences such as ‘Economics of Industries’, ‘Industry and Trade’, ‘Industrial Organization and

Policy’, ‘Commerce’ and ‘Business Economics’ etc. The name ‘Industrial Economics’ was adopted in the

early fifties perhaps through the writings of P.W.S. Andrews.1 Although this name is becoming popular day

by day some authors, particularly in the American circle, prefer ‘Industrial Organization’ as a title of the

subject.2 At present there is no clear-cut consensus on the name of the subject.

There are two broad elements of industrial economics. The first one, known as the descriptive element,

is concerned with the information content of the subject. It aims at providing the industrialist or

businessman with a survey of the industrial and commercial organizations of his own country and of the

other countries with which he might come in contact. It would give him full information regarding the natural

resources, industrial climate in the country, situation of the infrastructure including lines of traffic, supplies

of factors of production, trade and commercial policies of the governments and the degree of competition in

the business in which he operates. In short, it deals with the information about the competitors, natural

resources and factors of production and government rules and regulations related to the concerned industry.

The second element of the subject is concerned with the business policy and decision-making. This is the

analytical part dealing with topics such as market analysis, pricing, choice of techniques, location of plant,

investment planning, hiring and firing of labour, financial decisions, product diversification and so on. It is

a vital part of the subject and much of the received theory of industrial economics is concerned with this.

However, this does not mean that the first element, i.e. descriptive industrial economics, is less important.

The two elements are interdependent, since without adequate information no one can take proper decision

about any aspect of business.