economies of scale is the cost advantages that company attains because of size of the production, with the decreasing in cost per unit and increasing production.
Economies of scale is applicable to a various companies at various levels, such as manufacturing unit, When average costs goes on falling as output increases, then it is called economies of scale . Some economies of scale, such happens in heavy manufacturing industry where the have huge fixed cost so when the output increases the fixed cost gets divided over the production.
Another way of economies of scale is possible when the company can purchase the inputs at lower costs so that there fixed and input cost gets minimum
Example- a perfect example for economies of scale is iron and steel industry, buying its inputs at lowest prices and have heavy fixed cost so they produce in high quantity so there average cost decreases.
Economies of scale is applicable to a various companies at various levels, such as manufacturing unit, When average costs goes on falling as output increases, then it is called economies of scale . Some economies of scale, such happens in heavy manufacturing industry where the have huge fixed cost so when the output increases the fixed cost gets divided over the production.
Another way of economies of scale is possible when the company can purchase the inputs at lower costs so that there fixed and input cost gets minimum
Example- a perfect example for economies of scale is iron and steel industry, buying its inputs at lowest prices and have heavy fixed cost so they produce in high quantity so there average cost decreases.
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