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.
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.