Growth Flashcards
What is economies of scale?
The reduction in average costs enjoyed by A business as output increases, the more units that are produced, the cheaper each unit becomes to make.
What’s internal economies of scale?
A scale measure or companies efficiency of production and after because of factors controlled by its management team.
What’s external economies of scale?
A scale happen because of lager changes within the industry, so when the industry gross, the average costs of business drops.
Internal examples of economies of scale
l. Purchasing and marketing economies 2. Technical economies 3. Specialisation and managerial economies 4. Financial economies 5. risk-bearing economies
External examples of economies of scale
- Labour economies 2. Ancillary and commercial ec services 3. Co-operation 4. Disintegration
- infrastructure
What is a purchasing and marketing economies?
As firms get larger they require more raw materials and can get discounts from buying in large quantities, as firms get larger, the cost of advertising per unit of output decreases as advertising is a fc.
What is a technical economy?
Lager business may have more capital which can be invested into newer and expensive Technology which brings them a cost advantage as they can buy in bulk
What are specialisation and managerial economies?
Lager firms may benefit from having specialised management teams as better communication, coordination and a more efficient decision making processes
What are financial economies?
Managing financial assets such as trade and share prices, interest rates and exchange rates.
What are risk-bearing economies?
An economy of scale that creates room for a business to spread risks on different products that a company can fall back on.
What are labour economies?
Employees that have been trained prior the job so business don’t have high training costs.
What are ancillary and commercial services?
Something that is not essential to the main product in service but enhances the customer experience e.g. Packaging.
What is co-operation economy?
When firms within the same industry come together, they can take advantage of the existing infrastructure and supply network.
What is disintegration economy?
When the economy is broken up/collapsed.
What is infrastructure economy?
A firm may benefit from economics of scale it its located in a area with well-developed infrastructure, such as roads, ports and airports
