What is the difference between external and internal economies of scale?

  • Google+ icon
  • LinkedIn icon
  • 7987 views

Internal economies of scale relate to the firm itself (and only that firm), there can be an increase in its overall capacity or an increase in all of its factors of productions (FOPs)- this is a long term concept and requires time and planning by the firm. The sources of such an economy of scale are its physical assets, managerial style, finacial security and its power over suppliers.

Whereas an external economy of scale is the cost implications of an increase of the industry (this only applies to the pre-existing firms). This means a decrease in AC (average cost) due to specialists entering, technology, more suppliers, more finance available and FI teams.

 
Ellen  S. GCSE Economics tutor, A Level Economics tutor

About the author

is an online A Level Economics tutor with MyTutor studying at Edinburgh University

Still stuck? Get one-to-one help from a personally interviewed subject specialist.

95% of our customers rate us

Browse tutors

We use cookies to improve your site experience. By continuing to use this website, we'll assume that you're OK with this. Dismiss

mtw:mercury1:status:ok