Cost Reducing Methods

Economies of Scope:

                      Economies of Scale is that  if  firm produces multiple products using same inputs which will lead to cost reduction. It also saves time and cost.

                       

                      Ex:  If we see online e-commerce website  Flip kart  It offers services for multiple products like clothing, footwear,Gadgets etc . Here in single platform we are able to buy any product we like.

 

Economies of Scale:

                      If the Percentage change in output increases then the cost will come down.If the output level increases then the cost decreases.This is cost reducing method and there are two types of Economies of scale-

1.   Internal Economies of Scale 
2.   External Economies of Scale

                              Ex:  IBA college ordered laptops for students the price is low compared to normal purchase because as they are ordering for large no of students the price reduces.