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SCALE OF PRODUCTION/ECONOMIES OF SCALE
CONTENT
- Meaning of of Economies of Scale
- Types of Economies of Scale
- Internal Economies and Internal Diseconomies
- External Economies and External Diseconomies
Meaning of of Economies of Scale
By economies of scale or scale of production, we mean the growth of a firm or an industry resulting from expansion of the volume of productive capacity which leads to increase in output and decrease in its cost of production per unit of output.
Types of Economies of Scale
There are two types of economies of scale
- Internal economies and internal diseconomies
- External economies and external diseconomies
Internal Economies and Internal Diseconomies
Internal economies also known as the economies of large scale production are the advantages a firm derives from the expansion of its scale of production as a result of its own single efforts. In this case, as the size of the firm increases, there will be greater efficiency resulting in the fall in the cost per unit of output.
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