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Economics 101: Economies Of Scale | SterlingTerrell.net

Economics 101: Economies Of Scale



An important concept in economics is economies of scale.

Economies Of Scale is the decrease in cost per unit as quantity increases.

The most evident example of this, is the difference between small local stores, and national large-box retail stores and online retailers.

The large scale in which some businesses operate allow their cost structure to look much different than smaller stores.

All this says he obvious:  There is a big difference between ordering 10 units of something, and ordering 100,000 units of something.

More technically: This is where, as quantity increases, variable cost per unit goes down.