economies of scale

You are here


Economies of scale occur when firms are able to lower their unit costs due to being larger. This may happen for a variety of reasons. A larger firm may be able to buy in bulk, it may be able to organise production more efficiently, it may be able to raise capital cheaper and more efficiently. All of these represent economies of scale.

Specialization --
Specialization brought the division of labor. Economies of scale result from job specialization applied to activities where scale could be brought about through the divison of labor.