1.Ec of scale class.pptx - Learning objectives Questions • Explain Economies of scale • Analyse advantages of Economies of scale to business

1.Ec of scale class.pptx - Learning objectives Questions...

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Learning objectives
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Questions Explain Economies of scale. Analyse advantages of Economies of scale to business & consumers.
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GROWTH & EVOLUTION Economies of Scale Economies of scale are the cost advantages from expanding the scale of production in the long run. The effect is to reduce average costs over a range of output. • These lower costs represent an improvement in productive efficiency and can give a business a competitive advantage in the market. They lead to lower prices and higher profits
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Example
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Average cost
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Total cost Total fixed costs (TFC) these remain constant as output increases Average fixed cost (AFC) = total fixed costs divided by output. New I Phone where the fixed costs of developing the product are enormous , but these costs can be divided by millions of individual units sold across the world.
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Diseconomies of Scale As businesses grow in size there is a point where average costs begin to rise – inefficiency begins to appear – because of diseconomies of scale.
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9 Types of Economies of Scale These are the benefits a business gains as it grows. Internal economies of scale come from within the business ; External economies come from or affect the world outside the business INTERNAL ECONOMIES Technical Economies Managerial Economies Purchasing Economies Marketing Economies Financial Economies Risk-bearing economies EXTERNAL ECONOMIES Technological progress Improved transportation networks Abundance of skilled labour Regional specialisation
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Internal economies Purchasing Economies- This is commonly
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