When the level of production increases, costs can be spread over a large number of goods resulting in lower production costs
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What is purchasing economies?
Happens when a large firm buys its supplies in bulk, therefore getting them at a cheaper unit price
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What is marketing economies?
Larger firms can spread their marketing costs across all the extra sales made from this marketing. Advertising is a fixed cost so larger firms will spend less per unit
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What is managerial economies?
Where a large firm can afford to employ specialist managers who have expert knowledge. This means higher wages but these can be spread over the large number of goods produced.
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What is financial economies?
Resuts from banks being prepared to lend more moeny to larger firms at lower interest rates than smaller firms. This is because larger firms are more likely to pay them back
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What is technical economies?
Larger firms can afford to buy expensive machinery and build large factories to produce many goods. The cost can be spread amongst all the customers.
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Other cards in this set
Card 2
Front
What is purchasing economies?
Back
Happens when a large firm buys its supplies in bulk, therefore getting them at a cheaper unit price
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