Economies of Scale
The different types of economies of scale and why they occur in transport
- Created by: TessAni
- Created on: 18-01-13 11:50
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- Economies of Scale
- Technical Economies
- Occurs when physical capacity increases with a resultant fall in unit costs
- Output rises faster than total costs so unit/average cost falls
- Financial Economies
- The cost savings that large firms may receive when borrowing money
- Perceived risk is lower than for smaller firms
- Managerial Economies
- Savings in long-run average costs due to specialisation of management
- E.g. operational, marketing, financial, human resources
- Purchasing Economies
- reduced unit costs due to bulk of buying of inputs into a business
- Increased purchasing power for suppliers
- Fuel and vehicles
- External
- Falling long-run average costs that benefit all firms in an industry
- Technical Economies
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