NAME: FARYAL SHAHID
C
LASS: BBA 1-G
ECONOMIES OF SCALE
DEFINITION: In microeconomics, economies of scale are
the cost advantages that enterprises obtain due to their scale of
operation (typically measured by amount of output produced),
with cost per unit of output decreasing with increasing scale. At
the basis of economies of scale there may be technical, statistical,
organizational or related factors to the degree of market control.
Economies of scale apply to a variety of organizational and
business situations and at various levels, such as a production,
plant or an entire enterprise. When average costs start falling as
output increases, then economies of scale are occurring. Some
economies of scale, such as capital cost of manufacturing
facilities and friction loss of transportation and industrial
equipment, have a physical or engineering basis.
Another source of scale economies is the possibility of purchasing
inputs at a lower per-unit cost when they are purchased in large
quantities.
C
LASS: BBA 1-G
ECONOMIES OF SCALE
DEFINITION: In microeconomics, economies of scale are
the cost advantages that enterprises obtain due to their scale of
operation (typically measured by amount of output produced),
with cost per unit of output decreasing with increasing scale. At
the basis of economies of scale there may be technical, statistical,
organizational or related factors to the degree of market control.
Economies of scale apply to a variety of organizational and
business situations and at various levels, such as a production,
plant or an entire enterprise. When average costs start falling as
output increases, then economies of scale are occurring. Some
economies of scale, such as capital cost of manufacturing
facilities and friction loss of transportation and industrial
equipment, have a physical or engineering basis.
Another source of scale economies is the possibility of purchasing
inputs at a lower per-unit cost when they are purchased in large
quantities.
