ECONOMIES OF SCALE
Economies
means where the firm because of its increasing scale is arriving at benefits,
benefits in terms of reduction in cost of production per unit. What happens is
when the firm expands, when the firm produces more and more units, the cost of
production of one unit goes down. It keeps on going down as the production is
increased this is called economies of scale. That is as you increase the scale,
you tend to get economies from it.
For Example: Suppose you purchased a book online
which is 50 rupees and the delivery cost was 10 rupees so the total charge was
60 rupees, now if you purchase 5 more book so the net price of the book will be
250+10=260 rupees. So, more the quantity of a product is purchased, the more
you will save on that product.
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