Economies Of Scale
Economies Of Scale Meaning:
Exists when producing n+1 units of a good or a service is cheaper than producing n units on an average per-unit basis.
Exists when producing n+1 units of a good or a service is cheaper than producing n units on an average per-unit basis.
Economies Of Scale Example:
One of the most common reasons for the existence of an economy of scale is that suppliers of raw materials will give a discount to purchasers who buy in bulk. Economies of scale are also common in businesses with high capital costs: building a factory to produce one widget costs a lot of money, but once you have the factory economies of scale apply to producing additional widgets until the production capacity of the factory is reached.
One of the most common reasons for the existence of an economy of scale is that suppliers of raw materials will give a discount to purchasers who buy in bulk. Economies of scale are also common in businesses with high capital costs: building a factory to produce one widget costs a lot of money, but once you have the factory economies of scale apply to producing additional widgets until the production capacity of the factory is reached.