Beruflich Dokumente
Kultur Dokumente
Economies of scale
By the end of this lesson you should be able
to
Describe what is meant by economies of
scale
Explain 3 different examples of economies of
scale
Discuss why companies can also experience
diseconomies of scale
If the next
number is higher
/ lower what will
it do to the
average?
35
25
50
15
25
20
22
35
20
54
15
80
20
Batting average
Goals scored
Cost of a haircut
in Dorking
1. Economies of
scale
Arise when
unit costs fall
as output
increases
Economies of scale
By the end of this lesson you should be able
to
Describe what is meant by economies of
scale
Explain 3 different examples of economies of
scale
Discuss why companies can also experience
diseconomies of scale
Average
Cost per
Unit ()
Cost
Curve
AC1
AC2
Unit costs start to rise
as output rises above
Q3
= diseconomies of
scale
Q1
Q2
Q3
Quantity of output
Diseconomies of Scale
Costs
LAC
Diseconomies of Scale
Output
External
Occur within
an industry:
all
competitors
benefit
Technical
Marketing
Network
Financial
competitors benefit
Examples
Having many specialist suppliers close by
Access to research and development facilities
Pool of skilled labour to choose from
Diseconomies of scale
Factors which cause the
average production cost
per unit of a business to
increase above the
efficient level
Economies of scale
For your exam the board want you to focus
on
Purchasing
Technical
Specialisation
complex business
More frequent machinery & employee
breakdown if output & capacity utilisation
is too high
Loss of management
focus