Advantages and disadvantages of economies of scale

economies of scale advantages and disadvantages ppt

Workers who are too specialized may become alienated and disenchanted with their jobs. In other words, the heterogeneity of the organizational forms and of the size of the companies operating in a sector of activity can be determined by factors regarding the quality of the products, the production flexibility, the contractual methods, the learning opportunities, the heterogeneity of preferences of customers who express a differentiated demand with respect to the quality of the product, and assistance before and after the sale.

The sale of these lands to economic operators, who wish to open shops near the supermarket, allows the company in question to make a profit, making a profit on the revaluation of the value of building land.

pros and cons of economies of scale

This results in the loss of customers to other competitors. Greater Market Potential Economies of scale often coincide with a company's efforts to ramp up customer demand.

disadvantages of economies of scale pdf

Print View Economies and diseconomies of scale AO2 only AO2 You need to be able to: Demonstrate application and analysis of knowledge and understanding Command Terms: These terms require students to use their knowledge and skills to break down ideas into simpler parts and to see how the parts relate: Analyse, Apply, Comment, Demonstrate, Distinguish, Explain, Interpret, Sugges Start with a question Why are there no Hairdressing businesses the same size as Volkswagen cars?

In the pulp and paper industry it is economical to burn bark and fine wood particles to produce process steam and to recover the spent pulping chemicals for conversion back to a usable form. X- Inefficiency - management costs increase non-productive costs 4.

Advantages and disadvantages of diseconomies of scale

With size comes increased respect from the financial community, which means your firm has better credit, better terms on borrowed money and lower interest rates. Marginal Autonomy With the increase in the size of the firm, different departments must be given the power of decision-making. By-products are generated in the process. The tendency to exploit economies of scale entails a continuous increase in the volume of production which, in turn, requires a constant expansion of the size of the market. Economies of Indivisibility: Many factors of production are not perfectly divisible. By-Products A firm does not only produce the needed products or services. Economies of scale and returns to scale[ edit ] Economies of scale is related to and can easily be confused with the theoretical economic notion of returns to scale.

At last, prices fall and depression sets in.

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Economies and diseconomies of scale