Economies And Diseconomies Of Scale Flashcards
Define EoS
As the scale of production of a firm increases, the long run average cost falls
Define Internal EoS
Cost saving resulting from the growth of the firm itself
Define External EoS
Cost saving resulting from the growth of the industry or market of which the firm is a part of
What are the types of internal EoS?
Research and Development Financial Marketing Technical Managerial Purchasing (Buying bulk)
What are the types of internal EoS?
Infrastructure
Education and Training
Define DEoS
Where an increase in the scale of production leads to increases in average total costs for firms
What do DEoS arise from?
Managerial diseconomies of scale: Difficult to Supervise
Communication failure
Motivational diseconomies of scale: Workers feel more isolated and less important
Define Minimum Efficient Scale
The lowest point of output which the firm is able to produce at to achieve EoS
Define Increasing returns to scale
When an increase in factor inputs leads to a more than proportionate increase in outputs
Derieves from EoS
Define Decreasing Returns to Scale
When an increase in factor inputs leads to a less than proportionate increase in factor outputs
Derieves from DEoS
Define Constant returns to scale
Where an increase in factor inputs leads to a proportional increase in factor outputs
Define technological change
A term that is used to describe the overall effect of invention, innovation and the diffusion or spread of technology in the economy
Define Invention
Making something new, something that never existed before
Define Innovation
Improves on or makes a significant contribution to something that has already been invented
What are the effects of technological change on methods of production
Less labour intensity
Increased specilisation
Requires more resources
Less labour but more skilled workers
