Theory of Production Part 3 - Economies of Scale (Internal and External) - Economics video 41
The Theory of Production refers to the process where resources are used to create outputs that are suitable for exchange or use in a market. Internal Economies of Scale 1. Internal Economies of Scale refers to the economies that are internal to an organization increasing due to an increase in output. It results from large-scale production. A. Real Economies of Scale Real Economics of Scale refers to the lower physical quantities of inputs like labour, capital, and raw materials - Production Economies These arise from the use of production factors and include labour economies, technical economies and inventory economies - Market Economies Market Economies arise from advertising economies and are associated with the sale of an organization’s products. B. Pecuniary Economies of Scale Pecuniary Economies of Scale shows that with an increase in the scale of production several pecuniary economies will accrue to the organization. Internal Diseconomies of Scale Internal Diseconomies of Scale is available until a specific point where the plant would fully exploit all possibilities of economies of scale. 2, External Economies of Scale External Economies of Scale refer to factors that can enhance the business environment and which occur outside a firm but within the same industry. External Diseconomies of Scale External Diseconomies of Scale refer to the cost which increases because of factors that are outside the control of an organization but has an impact on the whole industry. This video is on Theory of Production Part - 3 and it has the following sub-topics. Time Stamps 0:00 Introduction 00:14 Internal Economies of Scale 00:34 Real Economics of Scale 00:46 Production Economics 01:29 Market Economics 02:18 Pecuniary Economics of Scale 02:59 Internal Diseconomies of Scale 03:28 External Economies of Scale 04:02