Economies of scope occurs when variety is formed through efficiency and not the volume. It is the concept that the unit cost to produce a product decreases as the variety of products increases which means producing more different products the total cost to produce each will decrease.
Let us understand with a real life example, have you ever noticed gold shop selling only gold? let's take example of Tanishq as we all know that they not only sell gold but also platinum, diamonds,etc.Why does this happen? This happens because the company can decrease it's average cost as the fixed cost gets distributed by different range of products than what it would cost for the company to only sell gold separately. Thus, they benifit through this approach of cost saving known as Economies of Scope.
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