Scribd Logo
Upload

Welcome to Scribd!

  • 16 views

    Economies of Scale, Disconomies of Scale & Economies of Scope

    Uploaded by

    salman_shaji
    This document discusses three economic concepts: economies of scale, diseconomies of scale, and economies of scope. Economies of scale refer to average costs declining as output increases, due to factors like technical, commercial, organizational, or financial advantages. Diseconomies of scale occur when average costs rise with increased output, due to inefficiencies from issues like poor communication or lack of control. Economies of scope exist when the average total cost of producing multiple goods is lower than separate firms each producing a single good. The minimum efficient scale is the lowest production point where long-run average costs are minimized.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd

    Economies of Scale, Disconomies of Scale & Economies of Scope

    Uploaded by

    salman_shaji
    16 views16 pages
    This document discusses three economic concepts: economies of scale, diseconomies of scale, and economies of scope. Economies of scale refer to average costs declining as output increases, due to factors like technical, commercial, organizational, or financial advantages. Diseconomies of scale occur when average costs rise with increased output, due to inefficiencies from issues like poor communication or lack of control. Economies of scope exist when the average total cost of producing multiple goods is lower than separate firms each producing a single good. The minimum efficient scale is the lowest production point where long-run average costs are minimized.

    Original Title

    Introduction(3)

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    PPT, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    This document discusses three economic concepts: economies of scale, diseconomies of scale, and economies of scope. Economies of scale refer to average costs declining as output increases, due to factors like technical, commercial, organizational, or financial advantages. Diseconomies of scale occur when average costs rise with increased output, due to inefficiencies from issues like poor communication or lack of control. Economies of scope exist when the average total cost of producing multiple goods is lower than separate firms each producing a single good. The minimum efficient scale is the lowest production point where long-run average costs are minimized.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    16 views16 pages

    Economies of Scale, Disconomies of Scale & Economies of Scope

    Uploaded by

    salman_shaji
    This document discusses three economic concepts: economies of scale, diseconomies of scale, and economies of scope. Economies of scale refer to average costs declining as output increases, due to factors like technical, commercial, organizational, or financial advantages. Diseconomies of scale occur when average costs rise with increased output, due to inefficiencies from issues like poor communication or lack of control. Economies of scope exist when the average total cost of producing multiple goods is lower than separate firms each producing a single good. The minimum efficient scale is the lowest production point where long-run average costs are minimized.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 16

    ECONOMIES OF SCALE , DISCONOMIES OF

    SCALE & ECONOMIES OF SCOPE

    By,

    1
    INTRODUCTION

    In long run, all inputs are varied. As its varied Law of Diminshing
    Returns to does not apply, thus Economies of Scale becomes
    applicable.

    CONSTANT REURNS TO SCALE – output increases in the same


    proportion as input.

    DISECNOMIES OF SCALE – output increase in less than in


    proportion of input.

    ECONOMIES OF SCALE – output increase in more than in


    proportion of input.

    OUTPUT will vary with variations INPUT ( Labour , Capital , etc,.)


    2
    ECONOMIES OF SCALE

    3
    DEFINITION

    Factors which cause average cost to decline


    in the long run as output increases.

    USES OF ECONOMIES OF SCALE :

    Economies of scale is a practical concept that is important for


    explaining real world phenomena such as patterns of international
    trade, the number of firms in a market, and how firms get “too big
    to fail". The exploitation of economies of scale helps explain why
    companies grow large in some industries

    4
    REASON FOR ECONOMIES OF SCALE

    Internal – advantages that arise as a result


    of the growth of the firm

    •Technical
    •Commercial or Marketing
    •Organisational
    •Financial

    5
    External – the advantages firms can gain as a
    result of the growth of the industry – normally
    associated with a particular area.

    •Supply of skilled labour


    •Reputation
    •Local knowledge and skills
    •Infrastructure
    •Training facilities

    6
    DISECONOMIES OF SCALE

    7
    DEFINITION

    Diseconomies of scale occurs when average


    costs starts to rise with increased output.

    USES OF DISECONOMIES OF SCALE :


    The implications of diseconomies of scale is that companies should
    achieve a certain size to benefit fully from scale economies , but
    should not become too big , when cost controls might slacken and
    organizational inefficiency is likely to develop.

    8
    REASON FOR DISECONOMIES OF SCALE

    • Poor communication
    • Alienation
    • Lack of control

    9
    10
    MINIMUM EFFICIENT
    SCALE

    11
    DEFINITION

    The minimum efficient scale is defined as the lowest


    production point at which long-run total average costs
    are minimized.

    USE OF MINIMUM EFFICIENT SCALE :


    For instance, if the minimum efficient scale is small relative to
    the overall size of the market (demand for the good), there
    will be a large number of firms. The firms in this market will
    be likely to behave in a perfectly competitive manner due to
    the large number of competitors.

    12
    ECONOMIES OF SCOPE

    • The average total cost of production declines as


    a result of increasing the number of different
    goods produced.
    • Economies of scope exist if a firm can produce
    several product lines at a given output level
    more cheaply than a combination of separate
    firms each producing a single product at the
    same output level.

    13
    Methods to gain Economies of scope

    • Flexible manufacturing
    New products
    Low cost

    • Diversification
    Sharing of resources
    Competitiveness

    14
    DIFFERENCE BETWEEN ECONOMIES OF
    SCALE AND ECONOMIES OF SCOPE

    • Economies of scope deals with how much output


    changes according to how many firms are producing a
    product and Economies of scale deals with how much
    output changes according to cost of production.
    • Economies of scope: joint output of a single firm is
    greater than output that could be achieved by two
    different firms when each produces a single product but
    in Economies of scale output can be doubled for less
    than a doubling of cost.

    15
    QUESTIONS ?

    16

    You might also like