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Economics of Scale
Cost advantages that enterprises obtain due to their scale of operation.
Implications
The cost advantages that a business can achieve by increasing the scale of production, where the cost per unit of output decreases as the scale of operation increases, often leading to competitive advantages in pricing and profitability.
Example
Example: A car manufacturer benefits from economies of scale by producing vehicles in large quantities, which lowers the cost per unit due to bulk purchasing of materials and more efficient use of production facilities.
Related Terms
Different from diseconomies of scale, where increasing production leads to higher per-unit costs due to inefficiencies, economies of scale focus on cost reductions through expansion.
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