Economies of scale Flashcards
1
Q
What are economies of scale?
A
When an increase in output leads to a decrease in unit cost
2
Q
What are Internal EoS?
A
Growth in the actual business
3
Q
List the internal EoS
A
- Purchasing (supplier discount)
- Marketing (advert cost spread)
- Technological (efficient output)
- Managerial (specialist staff)
- Specialisation (efficiency from focus)
- Financial (large firms get lower interest rates)
4
Q
List the External EoS
A
- Business clusters
- R&D in tech
- Discovery of raw materials
- Relocation of suppliers
5
Q
What is Diseconomies of scale
A
When a company grows so large that there is a rise in unit cost
6
Q
What are the forms of internal DisEoS
A
- Communication
- Coordination
- Motivation
7
Q
Explain the internal disEoS
A
Communication - More people = longer chains of command
Coordination - Misuse or delays of resources
Motivation - Employees feel insignificant in large firms
8
Q
What are the External DisEoS
A
- Overcrowding in industrial areas (e.g. traffic delays)
- Increased price of resources due to higher demand
9
Q
How can DisEoS be solved
A
- Use of better tech for communication and coordination
- Improved management
- Worker incentives
- Relocation from crowded areas
