Difference between Economies of Scale and Economies of Scope

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.

Economies of Scale

Economies of Scope

Definition

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

Cost reduction

Reduces the cost of one product

Reduces the cost by production of a variety of products

Deals with

Production of goods in bulk

Production of a variety of products within the same task

Reduction occurs due to

Bulk production of any product

Reduction occurs due to a variety of goods produced during the production process.

Approach

Old Approach

Relatively new approach

Resource Utilisation

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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