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Economies and Diseconomies of Scale:

PRESENTED TO Mrs. MEGHNAA SHARMA presented by group no-5 Neha Srivastava Riddhi Barman Ripinku Mathur Om Shyam Sandeep Yadav Rahul Pandey Economies and Diseconomies of Scale

Economies of Scale:

Economies of Scale Definition:- They are the cost advantages exploited by expanding the scale of production in the long run. These are the factors that cause a producer’s average cost per unit to fall as the scale is increased. Types of Economies of Scale:- Internal Economies of Scale, External Economies of Scale.

Internal Economies of Scale:

Internal Economies of Scale Definition:- When a firm increases its scale of production, the reduced cost which this firm gets as a result are called Internal Economies. These are the result of increased division of labor or the use of improved production methods. Factors responsible for Internal Economies:- Technical Economies of Scale, Managerial Economies of Scale, Labor Economies of Scale, Marketing Economies of Scale, Financial Economies of Scale, Risk – Bearing Economies of Scale.

External Economies of Scale:

External Economies of Scale Definition:- They are those benefits which are shared by a no. of firms or industries when the scale of production in any industry or group industries increases. It is a common benefit for all the firms working n the expanding industry. Factors responsible for External Economies:- Physical Factors, Economies of Concentration, Economies of Information, Economies of disintegration.

External Economies of Scale Contd..:

External Economies of Scale Contd.. Importance of External Economy:- External effects and welfare economies. Importance in economic development.

Diseconomies of Scale:

Diseconomies of Scale Definition:- They are the forces that cause large firms to produce goods and services at increased per- unit costs. They lead to rising long-run average costs. Types of Diseconomies of Scale:- Internal Diseconomies of Scale, External Diseconomies of Scale.

Internal Diseconomies of Scale:

Internal Diseconomies of Scale Definition:- They are those factors which raise the cost of production of a firm as its scale of production is increased beyond a point. Factors of Internal Diseconomies of Scale:- Unwieldy Management, Technical Difficulties.

External Diseconomies of Scale:

External Diseconomies of Scale Definition:- The forces which ultimately limit the expansion of an industry may be called External Diseconomies of Scale .

Use of External and Internal Diseconomies in the Classification of Industries:

Use of External and Internal Diseconomies in the Classification of Industries Industries could be classified into three types in order to determine their equilibrium:- A decreasing cost industry(increasing returns). A constant cost industry. An increasing cost industry(diminishing returns).

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