Economies of scale definition

Economies of scale definition - Examples of external economies of scale include:development of research and development facilities in local universities that several businesses in an area can benefit fromspending by a local authority on improving the transport network for a local town or cityrelocation of component suppliers and other support businesses close to the main centre of manufacturing are also an external cost saving. Thus, while a decision to increase its scale of operations may result in decreasing the average cost of inputs (volume discounts), it could also give rise to diseconomies of scale if its subsequently widened distribution network is inefficient because not enough transport trucks were invested in as well. Companies are often more profitable than smaller ones because of economies of scale: suppliers may offer discounts for larger orders, shippers may decrease per trip costs to compete for a large volume of business, and necessary production management staff may increase internal manufacturing efficiency. Thus, when an industry's scope of operations expands due to, for example, the creation of a better transportation network, resulting in a subsequent decrease in cost for a company working within that industry, external economies of scale are said to have been achieved.

Economies of Scale- Micro 3.2

In this video I explain the idea of what happens to output and costs in the long-run. I cover two similar but different ideas: ...