Saturday, September 15, 2018

What is economies of scale?
Economies of scale refers to decrease in long run average cost due to increased scale of production. This is one of the main reasons why big industries are more profitable than that of small companies. It is more profitable to buy things in bulk and in the same way it is also cheap for the manufacturers to sell. Therefore the major idea behind economies of scale is cost per unit declines as production increases.

For example one of the brilliant example is Tata Nano. The major reason for it's price being below 1 lakh is it scale of production.
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