Definitions for economies of scale
This page provides all possible meanings and translations of the word economies of scale
economies of scale(Noun)
: The characteristics of a production process in which an increase in the scale of the firm causes a decrease in the long run average cost of each unit.
Economies of scale
In microeconomics, economies of scale are the cost advantages that enterprises obtain due to size, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output. Often operational efficiency is also greater with increasing scale, leading to lower variable cost as well. Economies of scale apply to a variety of organizational and business situations and at various levels, such as a business or manufacturing unit, plant or an entire enterprise. For example, a large manufacturing facility would be expected to have a lower cost per unit of output than a smaller facility, all other factors being equal, while a company with many facilities should have a cost advantage over a competitor with fewer. Some economies of scale, such as capital cost of manufacturing facilities and friction loss of transportation and industrial equipment, have a physical or engineering basis. The economic concept dates back to Adam Smith and the idea of obtaining larger production returns through the use of division of labor. Diseconomies of scale is the opposite. Economies of scale often have limits, such as passing the optimum design point where costs per additional unit begin to increase. Common limits include exceeding the nearby raw material supply, such as wood in the lumber, pulp and paper industry. A common limit for low cost per unit weight commodities is saturating the regional market, thus having to ship product uneconomical distances. Other limits include using energy less efficiently or having a higher defect rate.
Sample Sentences & Example Usage
They're very large operations, lending themselves to economies of scale.
Firms that are already in the indexing space want to have economies of scale so they can reduce their costs.
There is a drive towards standardization but we believe that at this stage it isn't enough to generate big economies of scale.
SpiceJet has always been constrained by the lack of long-term orders. This will give us economies of scale and for our vendors and suppliers to see that we are growing.
As you get more economies of scale, you'll see more and more shifting over to natural gas, i think you are going to see larger and larger penetration of natural gas trucks in the marketplace. The economics are there.
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"economies of scale." Definitions.net. STANDS4 LLC, 2016. Web. 9 Feb. 2016. <http://www.definitions.net/definition/economies of scale>.