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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.
Also called resource cost advantage. The ability of a party (whether an individual, firm, or country) to produce a greater quantity of a good, product, or service than competitors using the same amount of resources. absorption The total demand for all final marketed goods and services by all economic agents resident in an economy, regardless of the origin of the goods and services themselves ...
Economies of scope are "efficiencies formed by variety, not volume" (the latter concept is "economies of scale"). [1] In the field of economics , "economies" is synonymous with cost savings and "scope" is synonymous with broadening production/services through diversified products.
In mainstream microeconomics, the returns to scale faced by a firm are purely technologically imposed and are not influenced by economic decisions or by market conditions (i.e., conclusions about returns to scale are derived from the specific mathematical structure of the production function in isolation). As production scales up, companies can ...
Pages for logged out editors learn more. Contributions; Talk; Economy of scale
If Y is a separable production set with a production value function f p, then (positive) economies of scale are present if f p (λx) > λf p (x) for all λ > 1 and f p (λx) < λf p (x) for all λ < 1. The opposite condition may be referred to as negative economies (or diseconomies) of scale.
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Economies of scale refers to the cost advantage arise from increasing amount of production. Mathematically, it is a situation in which the firm can double its output for less than doubling the cost, which brings cost advantages. Usually, economies of scale can be represented in connection with a cost-production elasticity, Ec. [3]