3.2 key Terms Flashcards
What is diseconomies of scale
When a business grows too fast that the average costs start to increase
What is economies of scale
When average costs fall as output increases
What is external economies of scale
When the average costs reduce as the whole industry grows
What is financial economies of scale
When large firms try raise finance, they benefit as they have a wider variety of sources to choose from and can often gain better interest rates
What is internal economies of scale
When a business invests in expanding production, which can reduce costs
What is purchasing economies of scale
Large firms get reduced costs when buying raw materials in bulk
What is risk bearing economies of scale
As a firm grows they diversify to reduce risk
What is managerial economies of scale
As a firm grows they can afford to employ more specialist managers
Technical economies of scale
Large businesses can reduce costs and become more efficient by investing in larger machinery and capital equipment
What is growth
Where a business tries to expand their revenue in hope that their profits will also increase
What is growth
Where a business tries to expand their revenue in hope that their profits will also increase
What is horizontal integration
Where 2 businesses in the same stage of production join together eg. Two retailers
What is horizontal integration
Where 2 businesses in the same stage of production join together eg. Two retailers
What is vertical integration
Where two businesses at different stages of production join together eg. Manufacturer and retailer
What is organic growth
Where a business expands from within the business eg. New products or new location
