Wednesday, May 30, 2007
Economies Of Scale
The increase in efficiency of production as the number of goods being produced increases. Typically, a company that achieves economies of scale lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods.
Can you identify some of the companies which are expanding like anything!!!..like Re…...sometimes it comes to mind if it is growing like bubble and may eventually get burst. There is some pace which an industry may project and if the future growth is in line with trends already set, gives more confidence on the companies. .Anyways!!
There are two types of economies of scale:External economies - the cost per unit depends on the size of the industry, not the firm.Internal economies - the cost per unit depends on size of the individual firm.
Economies of scale gives big companies access to a larger market by allowing them to operate with greater geographical reach. For the more traditional (small to medium) companies, however, size does have its limits. After a point, an increase in size (output) actually causes an increase in production costs. This is called "diseconomies of scale".Labels: Forgotten Facts, stories
Posted by "CPerformance" ::
8:40 AM ::
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