Economies of Scale

Abstract

Large organisations have an inherent advantage compared to their smaller rivals in that they are able to achieve certain economies simply because of the large scale of their operations. It is a case of ‘To him that hath shall be given’. The essence of the matter is that the overheads related to a larger output can be spread further. If this happens the cost per unit of production can be lowered, theoretically at least, for the benefit of the business proprietors (in the form of increased profits), the workers (in the form of increased wages), and the public (in the form of lower prices).