Economies of scale is basically the principle by which enterprises or business entities decrease their average cost of production by increasing their scale or volume of production.
Usually companies that require huge initial cost for infrastructure has their fixed cost quite high, in such scenarios economies of scale is what they look for. In malls or big stores sometimes they afford to give huge discounts because of this. They buy goods in bulk and get more margin in their cost price hence can afford to give goods at less selling price resulting in more demand from consumers.
In our day to day life also many a times we tend to buy things in bulk. We even make sure that we go in group so that any particular good is bought in bulk and we get the required margin or discount.
Usually companies that require huge initial cost for infrastructure has their fixed cost quite high, in such scenarios economies of scale is what they look for. In malls or big stores sometimes they afford to give huge discounts because of this. They buy goods in bulk and get more margin in their cost price hence can afford to give goods at less selling price resulting in more demand from consumers.
In our day to day life also many a times we tend to buy things in bulk. We even make sure that we go in group so that any particular good is bought in bulk and we get the required margin or discount.
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