What's the meaning of "economies of scale"?

Answer 1

The technical definition is: Economic property of production that affects cost if quantity of all input factors is increased by some amount.

Answer 2

Economies Of Scale Refer To

Answer 3

The increase in efficiency of production as the number of goods being produced increases. Typically, a company that achieves economies of scale lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods.

There are two types of economies of scale:

External economies - the cost per unit depends on the size of the industry, not the firm.
Internal economies - the cost per unit depends on size of the individual firm.

Answer 4

Contrary to popular belief this usage is not lazy or indecent nor is it as recent as many of you seem to think. At least as far back as the time of the American Revolution pls or plz was used in place of please in correspondence , again after the introduction of the telegraph, and most recently with the advent of text messaging, and all for the same reason, cost. During the early days of our country both paper and ink were expensive, so there were accepted methods of abbreviation to cram as much information into a letter as possible pls (or plz) was one example of this. When sending telegrams you were charged by the word (as in typing every 5 characters not actual words) so once again pls was used (among many other shortcuts u for you and so on) to make the sending of a message as cost effective as possible. As for text messaging, when first introduced, you may recall, we were charged per message we sent, so cutting letters out of messages meant a single text could be sent instead of two. It became a habit that carried over onto the internet, even though the need for the abbreviation no long exists,,,,to be fair though I am fairly sure you type OK or okay instead of Orl Korrekt which is the widely accepted original phrase the abbreviation came from, so can you really cast stones?

Answer 5

economies of scale is a good phenomenon for a country's economy where the output is increased more than proportionately than the input.
thatis you incur less factors of production like labour and machine and get more output.
it can be due to
1.volume discounts{means,when you produce in bulk the price can be better negotiated}
2.division of labour{with more no. of people working,allocation of tasks is done based on skill]

Answer 6

You achieve economies of scale if costs per unit falls as production increases. You have diseconomies of scale if they rise. Economies of scale is often seen resulting from mass production.

Answer 7

It means as You Produce more Volume - more production- you's Cost is becoming less. This is becuaze in big volume you buy raw matrials you'r cost of producing is low, and you sell more.
it was first introduced or used by Ford motors in their famous model T.

Salam

Answer 8

Economies of scale and diseconomies of scale refer to an economic property of production that affects cost if quantity of all input factors is increased by some amount. If costs increase proportionately, there are no economies of scale; if costs increase by a greater amount, there are diseconomies of scale; if costs increase by a lesser amount, there are positive economies of scale. When combined, economies of scale and diseconomies of scale lead to ideal firm size theory, which states that per-unit costs decrease until they reach a certain minimum, then increase as the firm size increases further.

Economies of Scale refers to the decreased per unit cost as output increases. More clearly, the initial investment of capital is diffused (spread) over an increasing number of units of output, and therefore, the marginal cost of producing a good or service decreases as production increases (note that this is only in an industry that is experiencing economies of scale)

An example will clarify. AFC is average fixed cost

If a company is currently in a situation with economies of scale ... let's say electricity, then as their initial investment of $1000 is spread over 100 customers, their AFC is \left ( \frac{1000}{100} \right ) = \$10.

If that same utility now has 200 customers, their AFC becomes \left ( \frac{1000}{200} \right ) = \$5 ... their fixed cost is now spread over 200 units of output. In economies of scale this results in a lower average total cost.

Economies of scale tend to occur in industries with high capital costs in which those costs can be distributed across a large number of units of production (both in absolute terms, and, especially, relative to the size of the market).A common example is a factory. An investment in machinery is made, and one worker, or unit of production, begins to work on the machine and produces a certain number of goods. If another worker is added to the machine he or she is able to produce an additional amount of goods without adding significantly to the factory's cost of operation. The amount of goods produced grows significantly faster than the plant's cost of operation. Hence, the cost of producing an additional good is less than the good before it, and an economy of scale emerges.

The exploitation of economies of scale helps explain why companies grow large in some industries. It is also a justification for free trade policies, since some economies of scale may require a larger market than is possible within a particular country — for example, it would not be efficient for Liechtenstein to have its own car maker, if they would only sell to their local market. A lone car maker may be profitable, however, if they export cars to global markets in addition to selling to the local market. Economies of scale also play a role in a "natural monopoly."

Typically, because there are fixed costs of production, economies of scale are initially increasing, and as volume of production increases, eventually diminishing, which produces the standard U-shaped cost curve of economic theory. In some economic theory (e.g., "perfect competition") there is an assumption of constant returns to scale.

Answer 9

In layman's terms, you gain a cost advantage by producing higher quantities.

Answer 10

Basically what Callista is sayin.... or meaning
The more you make, the cheaper it becomes on a per unit basis

If I make one chocolate it costs me 10USD per chocolate bar to make

If I make 100 chocolate bars it only costs me 6USD per chocolate bar to make!!!