Economies of Scale Flashcards
1
Q
What is economies of scale
A
Economies of scale describe businesses benefiting from a reduction (fall) in the average unit cost of their product or service because of increasing production (the number of units produced).
2
Q
Why does technical economies of scale happen?
A
Large companies are able to invest in expensive, specialist machinery and equipment.
3
Q
What is purchasing economies of scale?
A
This is when larger companies get discounts from their suppliers because they are buying lots of units in bulk.
