3.2.1 Flashcards
benefit of growth for a business
revenue increases
economies of scale
what happens to average costs as a business grows
long run average costs fall due to economies of scale
two types of economies of scale
internal and external
internal economies of scale
-p
purchasing
bulk buying
what are internal economies of scale
purchasing
technology
specialization
financial
risk-bearing
benefit of internal economies of scale
-p
lower average costs
internal economies of scale
-t
technological
increasing output
benefit of internal economies of scale
-t
lower average costs
internal economies of scale
-s
specialization
employing specialised staff
gain finance easier than smaller firms due to trust
benefit of internal economies of scale
-s
increased efficency
internal economies of scale
-f
financial
internal economies of scale
-r
risk bearing
diversification
benefit of internal economies of scale
-r
spread risk
two types of external economies of scale
labour and division of labour
external economies of scale
-l
labor
more workers
benefit of external economies of scale
-l
increase efficiency
lower training costs
external economies of scale
-d
division of labor
benefit of external economies of scale
-d
specialisation
two problems with growth
diseconomies of scale and overtrading
issue with diseconomies of scale in a business
communication and motivation
what is overtrading
funding a large volume of business without enough resources
issue with overtrading in a business
run out of cash
