improving cost efficiency

• focuses on saving money and reducing the businesses unit costs
• if units costs are reduced than the businesses will generate more profit on each unit sold
• lower unit costs helps the business reduce their prices and generate more sales leading to increase in profit
• cost efficiency can be increased by scaling up and taking advantage of economies of scale
• economies of scales occurs when unit cost falls as a result of producing on a larger scale
• economies of scales can occur because of firms who produce more need more materials which means that they buy in bulk and pay a lower unit price