Economies of Scale

• What is economies of scale?

  Cost advantages a business can achieve by increasing its production volume, resulting in lower average production costs per unit
• What are the 3 different types of economies of scale?

  • Purchasing
  • Technical
  • Managerial
• What is purchasing economies of scale?

  Bulk purchasing allows companies to negotiate lower prices with suppliers
• What is technical economies of scale?

  Specialised equipment and machinery can increase efficiency and reduce costs
• What is managerial economies of scale?

  Larger companies can attract and retain skilled managers, leading to better decision-making and efficiency
• What factors can cause economies of scale?

  • Bulk purchasing
  • Specialisation
  • Investment in technology
  • Spread of fixed costs