Describe what is economies of scale?

So economies of scale is an economic theory which explains why large firms tend to have cheaper per unit costs than smaller companies. The theory basis its ideas around a few key issues. There are many ways to achieve economies of scale. The definition is when unit costs fall as output rises. Below are a few examples how companies can achieve economies of scale. Technical economies of scale is when Large-scale businesses can afford to invest in expensive and specialist capital machinery. This will increade output without increasing unit costs as much hence in the long run achieving economies of scale.

HU

Related Economics GCSE answers

All answers ▸

Explain two advantages that firms may gain from a horizontal merger.


With the help of a diagram, explain the cause of demand-deficient unemployment.


Evaluate the view that perfect competition is a more efficient market structure than monopoly.


What is the effect of a rise in Interest rate on the level of growth in the economy?