More quantity , Lesser Cost, More Profit

                         More Quantity, Lesser Cost, More profit

As per the Textbook. Economies of scale means the property where long run Average Total cost falls as the quantity of output increases. In other words, as the advantage over the cost experienced by firm which lead to increase in quantity of output. Then we can say that a firm is achieving Economies of Scale. Economies of scale can arises by producing goods at higher level  that allows the worker to specialize in particular field. This specialization permit workers to become better at a Specific Task and will increase the efficiency.

For Instance- If a company makes 1000 gadgets they cost the company 50 rupees a piece to produce. Another Company makes 100000 gadgets , it will be cheaper comparatively and cost the company 20 rupees a piece to produce. This is because Company involves in Mass production. All inputs of production will efficiently be utilize and results in less of cost and more efficient output.

For Instance- KFC  is one of the good example of Economies of Scale. It has started the business from very small scale like selling it from door to door and cost was comparatively high because of less production at that time. It has increased the production because of more demand and lead to lesser cost , it is easy to afford also and ultimate profit will increase. so ultimately Mass production will increase the quantity of output and reduced the total cost.

Every Business aim to increase its Economies of scale to expand its business and to achieve long term goal of business. Therefore Economies of scale plays a vitol role for every Organisation.