Agglomeration economies of scale refer to the benefits from concentrating output and housing in particular areas. Cost reductions that firms obtain by locating in proximity to each other.
It helps to accumulate information and the flow of new and innovative ideas among firms. India has seen a strong growth in manufacturing industries on the south-east areas. These areas have good transport links for exporting to the rest of the world. Agglomeration economies may be external to a firm but internal to a region. It is important that these increasing returns to scale are a major contributing factor to the growth of cities. If an area specializes in the production of a certain type of good, all firms can benefit from various factors such as good supply networks, supply of trained workers, infrastructure built specifically for the industry and good transport links.
It helps to accumulate information and the flow of new and innovative ideas among firms. India has seen a strong growth in manufacturing industries on the south-east areas. These areas have good transport links for exporting to the rest of the world. Agglomeration economies may be external to a firm but internal to a region. It is important that these increasing returns to scale are a major contributing factor to the growth of cities. If an area specializes in the production of a certain type of good, all firms can benefit from various factors such as good supply networks, supply of trained workers, infrastructure built specifically for the industry and good transport links.
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