Economies of Scale

Posted in Finance, Accounting and Economics Terms, Total Reads: 1178

Definition: Economies of Scale

When the out of the firm rises, the average cost of producing that output will decline. This average cost will decline to a certain level and that may be because of: 

  •  Increased labour productivity because of learning curve effect and specialization
  • Effective production process because of flexibility  
  • Acquisition of inputs at a lower cost because of high bargaining power.

Therefore a situation where the output is doubled for less than a doubling of cost, it is termed as ‘ECONOMIES OF SCALE”. Here the marginal cost of production is lower for every additional unit produced.


Looking for Similar Definitions & Concepts, Search Business Concepts

Share this Page on:

Similar Definitions from same Category: