economies and dis economies of scale

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PRESENTED TO Mrs. MEGHNAA SHARMA presented by group no-5 Neha Srivastava Riddhi Barman Ripinku Mathur Om Shyam Sandeep Yadav Sandeep Yadav Rahul Pandey Rahul Pandey Economies and Diseconomies of Scale

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Page 1: Economies and Dis Economies of Scale

PRESENTED TOMrs. MEGHNAA SHARMA

presented by group no-5

Neha Srivastava Riddhi Barman

Ripinku Mathur Om Shyam

Sandeep YadavSandeep Yadav

Rahul PandeyRahul Pandey

Economies and Diseconomies of Scale

Page 2: Economies and Dis Economies of Scale

Economies of Scale

Page 3: Economies and Dis Economies of Scale

Internal Economies of Scale Definition:-

When a firm increases its scale of production, the reduced cost which this firm gets as a result are called Internal Economies.

These are the result of increased division of labor or the use of improved production methods.

Factors responsible for Internal Economies:-1. Technical Economies of Scale,2. Managerial Economies of Scale,3. Labor Economies of Scale,4. Marketing Economies of Scale,5. Financial Economies of Scale,6. Risk – Bearing Economies of Scale.

Page 4: Economies and Dis Economies of Scale

External Economies of Scale Definition:-

They are those benefits which are shared by a no. of firms or industries when the scale of production in any industry or group industries increases.

It is a common benefit for all the firms working n the expanding industry.

Factors responsible for External Economies:-1.Physical Factors,2.Economies of Concentration,3.Economies of Information,4.Economies of disintegration.

Page 5: Economies and Dis Economies of Scale

External Economies of Scale Contd..

Importance of External Economy:- External effects and welfare economies. Importance in economic development.

Page 6: Economies and Dis Economies of Scale

Diseconomies of Scale Definition:-

They are the forces that cause large firms to produce goods and services at increased per- unit costs.

They lead to rising long-run average costs.

Types of Diseconomies of Scale:-1.Internal Diseconomies of Scale,2.External Diseconomies of Scale.

Page 7: Economies and Dis Economies of Scale

Internal Diseconomies of Scale Definition:-

They are those factors which raise the cost of production of a firm as its scale of production is increased beyond a point.

Factors of Internal Diseconomies of Scale:-1.Unwieldy Management,2.Technical Difficulties.

Page 8: Economies and Dis Economies of Scale

External Diseconomies of Scale Definition:-

The forces which ultimately limit the expansion of an industry may be called External Diseconomies of Scale.

Page 9: Economies and Dis Economies of Scale

Use of External and Internal Diseconomies in the Classification of

IndustriesIndustries could be classified into three types in order to determine their equilibrium:-

A decreasing cost industry(increasing returns).A constant cost industry.An increasing cost industry(diminishing returns).

Page 10: Economies and Dis Economies of Scale