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Economies of Scale
Reduction in average total cost with increased production.
Internal Economies of Scale
Cost advantages from increased production within a firm.
External Economies of Scale
Cost benefits from industry-wide production increases.
Purchasing Economies of Scale
Lower costs per unit from bulk buying discounts.
Technical Economies of Scale
Cost savings from using specialized, efficient machinery.
Managerial Economies of Scale
Efficiency gains from employing specialized managers.
Financial Economies of Scale
Lower borrowing costs due to better credit ratings.
Diseconomies of Scale
Increased average costs as production expands excessively.
Internal Diseconomies of Scale
Cost increases due to inefficiencies within a firm.
External Diseconomies of Scale
Cost increases due to industry-wide factors.
Survival of Small Firms
Ability of small businesses to thrive despite competition.
Positive Externalities
Benefits experienced by third parties outside a transaction.
Division of Labour
Specialization of tasks to improve efficiency and productivity.
Fixed Costs
Costs that do not change with production volume.
Research and Development (R&D)
Investment in innovation to improve products or processes.
Skilled Worker Pool
Availability of trained labor in a specific area.
Infrastructure Improvements
Enhancements in facilities that support business operations.
Competitiveness
Ability to compete effectively in the market.
Job Lot Purchasing
Buying large quantities to secure lower prices.
Credit Terms Negotiation
Arranging favorable borrowing conditions with lenders.
Specialist Labour
Workers with expertise in specific fields.
Diseconomies of scale
Increase in average total cost with production scale.
Internal communication
Challenges in effective communication within large firms.
Coordination problems
Difficulty managing personnel and customer interactions.
Higher average costs
Increased costs that discourage firm growth.
Overtrading
Taking on excessive orders leading to potential losses.
Economies of scale
Reduction in average costs as production increases.
Optimum output
Minimum unit costs achieved at productive efficiency.
Productive efficiency
Point where unit costs are minimized.
Niche market
Targeting a specific segment of consumers.
Personal service
Providing tailored customer experiences.
Geographical segmentation
Dividing market based on location.
Tailor-made products
Custom products designed to meet specific needs.
Profit satisficing
Prioritizing satisfactory profits over maximum profits.
External economies of scale
Cost advantages from external factors affecting firms.
Internal economies of scale
Cost benefits realized within a firm as it grows.
Average total cost
Total cost divided by quantity produced.
Competitive advantage
Edge gained by reducing production costs.
Cost of communication
Expenses incurred for effective internal messaging.
Management challenges
Difficulties in overseeing larger workforce dynamics.
Stakeholder impact
Effects of scale economies on business stakeholders.
Firm growth discouragement
Higher costs leading to reluctance in expanding operations.
Efficiency in production
Optimal use of resources to minimize costs.
Economies of scale
Reduction in average production costs with increased output.
Short run costs
Costs that include both variable and fixed expenses.
Long run costs
All costs become variable over time.
Fixed costs
Costs that do not change with output levels.
Variable costs
Costs that change with production levels.
Short run average cost curve (SRAC)
Curve representing average costs in the short run.
Long run average cost curve (LRAC)
Curve representing average costs when all inputs are variable.
Internal economies of scale
Cost reductions from increasing internal efficiencies.
External economies of scale
Cost reductions from external factors affecting the industry.
Purchasing economies
Cost savings from bulk purchasing of materials.
Technical economies
Cost reductions from advanced production techniques.
Financial economies
Lower borrowing costs due to increased business size.
Managerial economies
Cost savings from hiring specialized managers.
Average cost per unit
Total cost divided by the number of units produced.
Cost per metre of trench
Total wages divided by metres dug.
Output
Total quantity produced by a business.
Decreasing average costs
Reduction in cost per unit as production increases.
Wages of foreman
£10 per hour for supervisory role.
Wages of worker
£5 per hour for trench digging.
Trench digging capacity
Worker digs five metres per hour.
Digger usage
Switching to machinery for increased efficiency.
Specialist managers
Experts that optimize business operations.
Economies of scale
Cost advantages gained as production increases.
Marketing economies
Reduced advertising costs per store in chains.
External economies of scale
Industry-wide benefits from growth, not just individual firms.
Supplier economies
Lower costs due to local supplier competition.
Educational economies
Training schemes tailored to local industry needs.
Financial economies
Specialized financial services for large industries.
Quantitative economies
Measured savings using financial methods.
Diseconomies of scale
Increased costs per unit with larger scale.
Coordination issues
Challenges in managing large organizations effectively.
Communication issues
Breakdown of efficiency as hierarchy increases.
Just-in-Time
Inventory strategy to reduce holding costs.
Debt factoring services
Selling receivables to improve cash flow.
Average costs
Total costs divided by output quantity.
Supervision limits
Maximum effective oversight by a manager.
Overhead costs
Indirect costs not directly tied to production.
Management meetings
Gatherings to improve coordination in large firms.
Skilled labour pool
Available workforce trained for specific industry needs.
Geographical concentration
Industry presence in a specific location.
Inefficiency causes
Factors leading to increased production costs.
Output capacity
Maximum production level achievable by resources.
Recruitment costs
Expenses associated with hiring new employees.
Diseconomies of scale
Increased costs due to organizational inefficiencies.
Motivation issues
Worker dissatisfaction in large organizations.
Overcrowding
Traffic congestion affecting business operations.
Increased resource prices
Higher demand raises costs for labor and materials.
Consumer benefits
Lower prices from economies of scale.
Shareholder advantages
Increased share values from business growth.
Monopoly suppliers
Large firms eliminating competition through scale.
Supplier pressure
Demand for cheaper goods from large businesses.
Small business survival
Strategies for small businesses against large competitors.
Service scalability
Local businesses thrive by offering non-scalable services.
Flexibility
Ability to adapt to market changes for small firms.
Target market size
Small businesses suited to niche markets.
Population density
Large businesses require substantial customer bases.
Quality of service
Added value justifying higher prices for small businesses.
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