Economies of scale

In economics, economies of scale means that when more units of a product are made at the same time, the cost it takes to produce a single unit will go down. When making a product, there is a maximum capacity that can be made, at a given time. This capacity depends on the ways in which the product is made. If it is made by machines, these machines have a maximum number they can produce. Wanting to produce more than this number means new machines (or a new way to make these products) are needed. Adam Smith first had this idea of economy of scale, which he obtained through division of labour.

The opposite of economies of scale are diseconomies of scale.

References

↑ O'Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics: Principles in Action. Upper Saddle River, NJ: Pearson Prentice Hall. pp. 157. ISBN 978-0-13-063085-8.

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[1] O'Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics: Principles in Action. Upper Saddle River, NJ: Pearson Prentice Hall. pp. 157. ISBN 978-0-13-063085-8.