Economies of scale
A proportionate saving in costs gained by increased level of production.
It refers to the reduced costs per unit that arise from increased total output of a product. For example, a larger factory will produce power hand tools at a lower unit price, and a larger medical system will reduce coat per medical procedure.
There are two kinds of economies for the company
1. Internal economies
a. Expansion of the firm itself
b. Lower long run average cost
c. Efficiencies from larger scale production
d. Range of economies ( technical & financial)
e. Technical economies
f. Risk bearing economies
2.External economies
a. Expansion of the industry
b. Benefits most / all firms
c. Agglomeration economies are important
d. Helps to explain the rapid growth of many cities
e. Economies of concentration
f. Economies of information
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