What are economies of scale?

Economies of scale describe the positive effects of increasing production to a firm. The principle is that as output increases, it could be the output of shirts, for example, then the average cost per shirt will fall. This is because the costs of production are spread over higher output. Consequently, the firm is able to become more profitable as average costs fall. We should be aware that there is a limit to the usefulness of economies of scale, as once production increases beyond a certain point, the costs of production will begin to rise again if more investment in land, labour or capital is required.

MH
Answered by Matthew H. Economics tutor

1723 Views

See similar Economics GCSE tutors

Related Economics GCSE answers

All answers ▸

Explain how an increase in interest rates can affect total spending in the UK.


What is the Marshall Lerner Condition?


What is a Macroeconomic consequence of an increase government spending?


Explain the meaning of the term ‘externality’ and give an example of one that is negative.


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences