3.1 Business Growth

Question 1

Why do firms grow?

Answer 1

Economies of scale - when production increases and a firm grows larger, average costs decrease. Generates more revenue therefore larger profit

More market share which gives the ability to influence prices, restrict the ability of other firms to enter the market and reduce costs by driving down the prices of raw materials (monopsony power)

More security as they are able to build up assets and cash and they are likely to sell a bigger range of goods in more than one market