Explain the benefits of a firm benefitting from Economies Of Scale

If a firm can benefit from Economies of Scale this will mean as the firm grows their average costs reduce. Therefore, they are more efficient, as a result they are able to be more competitive in the market and choose to growth maximise to increase their market share. As a result of reducing their price levels, as they pass on the efficiency gains to that of the consumer via the lower prices. Therefore, especially if the product is price elastic, this will lead to a high increase in demand, which will increase total revenue. As costs reduce and revenue increases, the profitability of the company increases.

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Answered by Jay T. Business Studies tutor

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