Economies of scale are the advantages that a firm obtain due to their scale of operations which is typically measured by the amount of outputs produced with the cost per unit of output decreasing with increasing scale. When more unit of goods and services can be produced on a larger scale with few input cost, economies of scale is achieved.
Economies of scale often rely on fixed cost which is constant and don't vary with output or variable cost.
There are two types of economies of scale. First one is internal economies of scale and second one is external economies of scale.
For example: If a firm is manufacturing cars, then it should split the process in order to maintain specialisation. Through specialisation less training will be required and production process will be efficient.
Economies of scale often rely on fixed cost which is constant and don't vary with output or variable cost.
There are two types of economies of scale. First one is internal economies of scale and second one is external economies of scale.
For example: If a firm is manufacturing cars, then it should split the process in order to maintain specialisation. Through specialisation less training will be required and production process will be efficient.
No comments:
Post a Comment