Economies of scale

Question 1

Technical

Answer 1

Related to production

Methods of producing larger volumes, often more efficient

Larger business have better/ more advanced machinery, need fewer staff so wage costs fall

Question 2

Managerial

Answer 2

Large businesses employ managers who oversee strategy and have specialist knowledge/ skills for their specific department

Work done is quicker/ more efficient

Question 3

Purchasing (discounts)

Answer 3

Big businesses negotiate when buying a lot of supplies

Can get bigger discounts and longer credit periods#

Banks often give them lower interest rates

Question 4

Marketing

Answer 4

Marketing = fixed costs, bigger businesses sell more so can spread out the costs over more units

Can afford more effective means of advertising (tv adverts)

Question 5

Diseconomies of scale

Answer 5

A company grows so large that its costs per unit increase
- due poor communication, coordination problems, lack of motivation

Issues make the business less efficient