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Economies of scale is related to and can easily be confused with the theoretical economic notion of returns to scale. Where economies of scale refer to a firm's costs, returns to scale describe the relationship between inputs and outputs in a long-run (all inputs variable) production function.
Localization and Urbanization Economies are two types of external economies of scale, or agglomeration economies. External economies of scale result from an increase in the productivity of an entire industry, region, or economy due to factors outside of an individual company. There are three sources of external economies of scale: input sharing ...
If only diseconomies of scale existed, then the long-run average cost-minimizing firm size would be one worker, producing the minimal possible level of output. However, economies of scale also apply, which state that large firms can have lower per-unit costs due to buying at bulk discounts (components, insurance, real estate, advertising, etc.) and can also limit competition by buying out ...
Economies of scale external to a firm result from spatial proximity and are called agglomeration economies of scale. Agglomeration economies can be seen as the external condition for companies and the internal condition for the region. Increasing returns to scale, according to Beckmann, is integral to understanding why urban centers form.
Scope economies, or economies of scope, describe the aspect of production wherein cost savings result from the scope of an enterprise, as opposed to its scale (see economies of scale). Meaning, there are economies of scope where it is less expensive for firms to combine two or more product lines into one, than it is to produce each product ...
For larger households, each additional adult is given a smaller value of 0.5 to reflect the economies of scale achieved when people live together, arising when households share resources such as water and electricity, which reduces living costs per person. Children under the age of 14 are given a value of 0.3 to take account of their lower ...
In economics, an optimum currency area (OCA) or optimal currency region (OCR) is a geographical region in which it would maximize economic efficiency to have the entire region share a single currency. The underlying theory describes the optimal characteristics for the merger of currencies or the creation of a new currency.
The Big Push Model is a concept in development economics or welfare economics that emphasizes the fact that a firm's decision whether to industrialize or not depends on the expectation of what other firms will do. It assumes economies of scale and oligopolistic market structure. It also explains when the industrialization would happen.