External economies of scales or economies of agglomeration:
The term agglomeration is used to refer the occurrence of number of firms being located close to one another.There are two categories of agglomerations , they are urbanization economies and localization economies.
The term agglomeration is used to refer the occurrence of number of firms being located close to one another.There are two categories of agglomerations , they are urbanization economies and localization economies.
Urbanization economies: The Urbanization economies refers to an extended city or comprising built up town area of central place linked by continuous urban area.
Example: The best example is shopping mall.There are many departmental stores in mall which are not similar departments but locating close to each other helps to use the same infrastructure like building, parking place & other areas.
Localization economies: These are those benefits for a firm derived from the presence of firms belonging to the same industry in an area.
Example: In Bangalore , many similar industries are located in a same area called 'Peenya ','Electronic city' and software companies in a area called 'Manyata Tech Park'. In the same way i.e in Hyderabad many companies are located in a same area called 'Hi-Tech'.
Localization economies: These are those benefits for a firm derived from the presence of firms belonging to the same industry in an area.
Example: In Bangalore , many similar industries are located in a same area called 'Peenya ','Electronic city' and software companies in a area called 'Manyata Tech Park'. In the same way i.e in Hyderabad many companies are located in a same area called 'Hi-Tech'.
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