Experience curve

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Definition: Experience curve

Experience curve is a graph showing the relation between the experainceeffect on the cost structure. The basic principle behind this is that as a firm goes on icreasing its experience it gains expertise in its operations and functions and as a result the overall cost for the firm to do a process keeps on decreasing. This idea was given the Boston Consulting Group in 1960 as a indicator for the semiconductor manufacturing firm after observing their the cost structure.

curve 2

On one axis we have number of units produced  and other have the cost of production including fixed and variable cost.

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