4.2.5. Economics of Scale

4.2.5. Economics of scale

When a firm expands its scale or level of operation, it may get some benefits called economies of scale. Generally the economies of scale are classified as internal and external economies. Those economies which accrue to a firm on expansion of its own size are known as internal economies. Those economies which accrue to a firm not due to its own operations but due to the operations of some other firms are called external economies.

Internal economies may be both real and pecuniary. When a firm expands its scale of operation, it receives the following internal economies:

i) Labour economies

ii) Technical economies

iii) Marketing economies

iv) Managerial economies

v) Financial economies

vi) Economics of survival

Last modified: Tuesday, 14 February 2012, 10:20 AM