Economies Of Scale

The increase in efficiency of production as the number of goods being produced increases. Typically, a company that achieves economies of scale lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods.

There are two types of economies of scale:

-External economies - the cost per unit depends on the size of the industry, not the firm.
-Internal economies - the cost per unit depends on size of the individual firm.

Economies of scale gives big companies access to a larger market by allowing them to operate with greater geographical reach. For the more traditional (small to medium) companies, however, size does have its limits. After a point, an increase in size (output) actually causes an increase in production costs. This is called "diseconomies of scale".


Investment dictionary. . 2012.

Look at other dictionaries:

  • economies of scale — scale effect Reductions in the average cost of production, and hence in the unit costs, when output is increased. If the average costs of production rise with output, this is known as diseconomies of scale. Economies of scale can enable a… …   Accounting dictionary

  • economies of scale — scale effect Reductions in the average cost of production, and hence in the unit costs, when output is increased. If the average costs of production rise with output, this is known as diseconomies of scale. Economies of scale can enable a… …   Big dictionary of business and management

  • economies of scale — pl.n. circumstances, conditions, etc. which encourage mass production of a commodity by lowering its unit cost as greater quantities are produced * * * …   Universalium

  • Economies of scale —   [ɪ kɔnəmɪz ɔv skeɪl, englisch], die Skalenerträge …   Universal-Lexikon

  • economies of scale — pl.n. circumstances, conditions, etc. which encourage mass production of a commodity by lowering its unit cost as greater quantities are produced …   English World dictionary

  • economies of scale — UK US noun [plural] business reductions in the cost of making and selling products that are made possible because a business is very large Thesaurus: discounts and price reductionssynonym units of moneyhyponym …   Useful english dictionary

  • Economies of scale — The decrease in the marginal cost of production as a plant s scale of operations increases. The New York Times Financial Glossary * * * economies of scale economies of scale ➔ scale * * *    The theory that it is cheaper and more efficient to… …   Financial and business terms

  • economies of scale — Achievement of lower average cost per unit through increased production. Bloomberg Financial Dictionary The decrease in the marginal cost of production as a firm s extent of operations expands. Bloomberg Financial Dictionary * * * economies of… …   Financial and business terms

  • Economies of Scale — Dieser Artikel wurde auf der Koordinationsseite des WiwiWiki Projekts gelistet um die Bearbeitung effektiver gestalten zu können. Bitte beteilige dich an der Diskussion. Als Skaleneffekt (Skalenertrag, Größenkostenersparnis, Economies of Scale)… …   Deutsch Wikipedia

  • economies of scale — N PLURAL Economies of scale are the financial advantages that a company gains when it produces large quantities of products. [BUSINESS] Car firms are desperate to achieve economies of scale …   English dictionary

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