Economies of Scale

The different types of economies of scale and why they occur in transport 

  • Created by: TessAni
  • Created on: 18-01-13 11:50
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  • Economies of Scale
    • Technical Economies
      • Occurs when physical capacity increases with a resultant fall in unit costs
      • Output rises faster than total costs so unit/average cost falls
    • Financial Economies
      • The cost savings that large firms may receive when borrowing money
      • Perceived risk is lower than for smaller firms
    • Managerial Economies
      • Savings in long-run average costs due to specialisation of management
      • E.g. operational, marketing, financial, human resources
    • Purchasing Economies
      • reduced  unit costs due to bulk of buying of inputs into a business
      • Increased purchasing power for suppliers
      • Fuel and vehicles
    • External
      • Falling long-run average costs that benefit all firms in an industry


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