Economies of scale and Economies of scope are two concepts that have one thing in common, which is helping the organisation in reducing costs.
Economies of scale occur when a company reaches a certain level of production where the cost of production will not be increasing, instead it is reduced. Such a situation takes place when products are produced in bulk. In other words, the cost of production is reduced with items produced in bulk.
Economies of scope, on the other hand, occur when a company produces various products and as a result of that, the cost of production gets reduced.
Let us look at some of the points of difference between the economies of scale and economies of scope.
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Economies of scale is a concept of Economics that suggests that when a company reaches a point where the production cost is decreasing due to bulk production |
Economies of scope is an economic concept that suggests that production of various products can lead to reduction in cost |
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Reduces the cost of one product |
Reduces the cost by production of a variety of products |
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Production of goods in bulk |
Production of a variety of products within the same task |
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Bulk production of any product |
Reduction occurs due to a variety of goods produced during the production process. |
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Old Approach |
Relatively new approach |
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More resources are utilised |
Less resources are utilised |
This article was all about the topic of Difference between Economies of Scale and Economies of Scope, which is an important topic for Commerce students. For more such interesting articles, stay tuned to BYJU’S.
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