Title: Economies Of Scale | Intelligent Economist
Headings: Economies of Scale
Economies of Scale
Economies of Scale Definition
Who Can Enjoy Economies of Scale?
A Quick Example of Economies of Scale: Video Games
Specialization & Division of Labor
Internal Economies of Scale
Examples of Internal Economies of Scale
1. Specialization through the division of labor
2. Technology
3. Bulk buying power
4. Financial
5. Managerial
6. Network
7. Risk-bearing
External Economies of Scale
Examples of external economies of scale
1. Transportation
2. Skilled labor
3. Collaborations by smaller businesses
Diseconomies of Scale
Diseconomies of Scale Graph
Effects of Economies of Scale on Production Costs
Economies of Scale Graph
Comparing Economies of Scale and Economies of Scope
Prateek Agarwal
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Content: Buying in bulk reduces the cost per unit to the consumer because the manufacturer wants to spend less money on packaging (larger containers/packages means less packaging overall) and because you spend less time and money traveling to and from retailers. A Quick Example of Economies of Scale: Video Games
Just as one easy-to-understand example of economies of scale, if we are producing a video game, there is the one-time cost of actually creating the game. As we create more copies of the game, the cost per game decreases as the one-time cost is distributed—in other words, as we achieve economies of scale. We may get lower costs on distribution and raw materials, higher manufacturing efficiency, and other benefits that increase net profits. Specialization & Division of Labor
Adam Smith, an enormously influential, 18th-century Scottish economist sometimes referred to as “the Father of Economics,” wrote about specialization and division of labor with regard to economies of scale. According to Smith, there are two primary, interconnected ways of gaining higher returns on production: specialization on the one hand, and division of labor on the other. With the use of these two strategies, individual workers can focus on their own specialized tasks and thereby become better at these tasks—becoming increasingly skilled within their specializations. Over time, each of the specialized tasks is performed at a higher level of quality and skill, as well as at a higher rate.