What are 'Economies of Scale'?

Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger factory will produce power hand tools at a lower unit price, and a larger medical system will reduce cost per medical procedure. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

| Term of the Day Economies of Scale Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger factory will produce power hand tools at a lower unit price, and a larger medical system will reduce cost per medical procedure. Breaking it Down: Economies of scale give rise to lower per-unit costs for several reasons. First, specialization of labor and more integrated technology boost... Read More » Related to "Economies of Scale" What Are Some of the Variables Involved in Economies of Scale? Economies of scale occur when a firm's costs decrease due to large masses of production or improved manufacturing efficiencies. Read More » How do Economies of Scope and Economies of Scale Differ? Learn about economies of scope and economies of scale, the difference between the two economic concepts, and how they offer cost advantages to companies. Read More » How do economies of scale work with globalization? Discover how globalization can lead to unprecedented economies of scale for firms across the world, leading to higher global efficiency and productivity. Read More » Related Definitions Marginal Cost Of Production Marginal cost of production is the change in total cost that comes from making or producing one additional item. Read More » Operational Efficiency Operational efficiency is primarily a metric that measures the efficiency of profit earned as a function of operational costs. Read More » Fixed Cost A fixed cost is an expense that remains the same regardless of an increase or decrease in the number of goods or services sold or produced. Read More » Applied Cost Applied cost is a term used in cost accounting to denote the cost assigned to something, which may be different from the actual cost. Read More » CONNECT WITH INVESTOPEDIA Email sent to: mondemand.forex@blogger.com To update your newsletter preferences or unsubscribe, click here. 114 West 41st St, floor 8 New York NY 10036 © 2019, Investopedia, LLC, All Rights Reserved | Privacy Policy