Sole Proprietorship : Demerits and Limitations

Definition of Sole Proprietorship

Sole Proprietorship definition according to Prof Hynes

Sole Proprietorship is that form of business which has a single owner, who has the total responsibility of the business, who runs the business and also bears the risk on the failure of business.

Despite high mortality the sole entrepreneur survives.

In the words of Dr. John A Shubin

Under the Sole Trader-ship Business, a single man is an organizer; he is the owner and runs the business by his own name.

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Sole Proprietorship : Advantages, Merits and Importance

One man’s business is best in the world, if that one man is big enough to manage everything.

Meaning of Sole Proprietorship

Sole trader-ship (proprietorship) is that form of business organisation whose owner is just one person, who is called the sole trader. This person invests capital in the business, and is solely responsible for all the profits and losses of the business. The same personals the manager and organizer of the business.

Advantages, Merits and Importance of Sole Proprietorship

Following are the merits (or importance) of the sole proprietorship system
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Sole Proprietorship : Definition and Its Characteristics

Introduction to Sole Proprietorship

Sole trader-ship or proprietorship is the oldest form of business in all the countries of the world. Along with the progress of business its form has also been changing. But due to its simplicity, quick formation and easiness, this form is the most popular and in practice in the world.

One man’s business is best in the world, if that one man is big enough to manage everything.

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Law of Equi-Marginal Utility : Criticism and Limitation


Following are the main reasons for the criticism of the Law of Equi-marginal utility by H. H. Gossen. Although, it is a basic law of economics and consumers knowingly or unknowingly are compelled, to follow this law. This law is applicable in every field of economic analysis.
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Law of Equi-Marginal Utility : Definition and Explanation

How is Law of “Equi-marginal utility” helpful in maximizing the utility of a consumer?


We know that wants of every man are unlimited. Wants arise again and again but man has limited means (income) to fulfill his wants and means have , alternative uses. Thus, man always face problem of distribution of limited means of alternative uses, on his wants; so that, he may get maximum satisfaction (or utility). Law of Equi-Marginal Utility presents the solution of this problem. This law states that if a person, wishes to get maximum satisfaction from his income, he should spend his income on different items, in such a way that the utility of last unit of money spent on each commodity, should be equal or almost equal. This law of consumption was propounded by a French Economist, H. H. Gossen in 1854 and it is also known as the Second Law of Gossen.
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Marginal Utility : Definition and Classification

Definition of Marginal Utility

Marginal Utility is the utility which is derived from the consumption of an additional unit of a commodity. In other words, it is the addition to total utility, resulting from adding one unit to the consumption of a commodity.

Example : Ram consumes 6 ice creams at a time. In this case, 6 ice creams will be the marginal unit and utility derived by him from adding one unit to the consumption of a commodity.

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Utility – Concept and Characteristics of Utility

Meaning of Utility

UtilityUtility means the power that satisfies any want. It is such an internal quality; which is found in all commodities desired by a person. The quality (power or capability) of commodity which satisfies the human want; directly or indirectly is called Utility. Those commodities, which have wants satisfying power are called ‘Useful Commodities‘.
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