Essay Economies of Scale

2593 Words Oct 26th, 2014 11 Pages
ECONOMICS OF SCALE
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Economics of scale
Introduction
Economies of scale is the cost advantages by enterprises due to size, input, or scale of operation with cost per unit decreasing with increasing scale as fixed costs are spread out more to units of output (Thatcher, 2009). The reason why some regions are more developed than other regions economically is because they produce their goods more efficiently and hence bringing more profit than competitor's regions. Since economies of scale lay it main focus on having an efficient production this shapes the economic development of regions. This paper is about economies of scale it describes how economies of scale shape the economic development of regions through
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For the external economies, it can be described in five types this being; technical economies, purchasing economies, administrative savings, financial savings and risk bearing economies.
Economies of scale put focus on how to produce goods efficiently by ensuring that a low cost is used to produce many goods. Regions that apply economies of scale in their production are likely to end up being developed regions this shows how Economies of scale shapes economic development of the region (Norman, 2010).
External economies of scale
In the external economies of scale, it describes that there are positive externalities that come up, as result economies of scale. A business that has developed can improve infrastructure around it hence an advantage to it (Thatcher, 2009). One way of measuring the economic development of the region is by viewing its infrastructure, a developed region let's say a country has modern and well built infrastructure while a country that is underdeveloped has poor infrastructure. After applying economies of scale which are going to bring up efficient production and afterwards excellent profits, there are external positives that will come, as a result this includes a well built infrastructure. A fine will even attract more customers hence leading to great production of goods again the profits of the firm/organization will raise as a result of the same. For example, the Motor Sport Valley has a high impact in Britain

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