Topic Seven, Part 9 - Productivity and Economies/Diseconomies of Scale Flashcards
What is internal (Organic) growth?
Grows naturally over time through satisfying increasing demands
What is external growth?
Growth from merging or taking over another business
What are Economies of scale?
The benefits that firms gain by increasing the scale of production
What are Purchasing economies?
Purchasing large amounts of raw materials for a discount.
What are Financial economies?
larger firms are able to negotiate cheaper loans
What are Managerial economies?
larger firms are able to employ specialist managers
What are Marketing economies?
TV advertising are only available to larger businesses
What are Risk-bearing economies?
Larger firms diversify into different markets
What are Concentration economies?
Skilled labour move towards where industries are located
What are Information economies?
The buildup of information for different industries especially from the internet
What are Diseconomies of scale?
The point where a certain level of output no longer reduces costs
Why do Diseconomies of scale lead to a rise in costs in larger businesses?
- Harder to manage production
- overtime to meet demands
- Machines are used more so break more
