Tuesday, July 31, 2012

Class XI, Principles of Economics, "Economics of Scale"

Economics of Scale

Professor Marshall his divided the economics arising from an increase in the scale of production of any kind of goods in the broad classes.
External Economics
The outcomes of the general development of an industry either in a particular locality or a country are called external economics of scale. These economics do not depend upon the organizing capacity of particular business man, rather they are available to all the businessman alike. They depend on external condition and independent of any individual business or establishment and of it’s resource. Some examples are
  • Benefits of low freight rates
  • Benefits of banking facilities
  • Benefits of power development
Internal Economics
The outcomes of the expansion of a particular firm cutting down the production costs and securing increasing returns is called Internal Economics for that firm are not shared by other firms and only a particular business man or firm enjoys the benefits. There can be many casual economics for a firm when it expands itself. Some of them may be:
  • Benefit of expert services
  • Benefit of construction
  • Benefit of use of latest machinery
  • Benefit of use of division of labour.

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