Nature of scale
The fall in average costs a business can experience from significantly increasing the scale of its operations
What are economies of scale?
TFC + TVC
What is the formula for calculating total costs (TC) of production?
Businesses in this sector of the economy are responsible for extracting natural resources
What is the primary sector?
Larger businesses can order raw materials in bulk and receive discounts from suppliers therefore reducing their average costs of production
What are purchasing economies of scale?
Costs which vary according to output. The greater the output the higher these costs will be and vice versa. Example costs include raw materials, fuel, packaging and piece-rate wages.
What are variable costs?
A legal structure of business ownership with limited liability where shares can only be sold to invited family and friends.
What is a privately held company (ltd)?
When a business grows too large and experiences rising average costs, caused by things such as miscommunication or poor control over staff.
What are diseconomies of scale?
Costs which do not vary according to output. Sometimes known as 'entry costs'. Example costs include insurance, employee salaries and office rent.
What are fixed costs?
This economic indicator measures the increase in the average price level of goods and services over time.
What is inflation?
Larger businesses can afford specialized machinery, robotics, and technology that leads to improvements in efficiency and productivity and therefore lower average costs of production
What are technical (technological) economies of scale?
These are costs that cannot clearly be linked to the output of a single product. They are also known as overheads. Examples of these costs include the salaries of administrative staff, or an electricity bill.
What are indirect costs?
The Ansoff Matrix identifies these four strategies to help businesses assess risks and opportunities for growth
What are market penetration, product development, market development, and diversification?
Larger companies reduce their average costs by spreading fixed advertising costs - such as advertising on national TV - across a higher volume of sales.
What are marketing economies of scale?
Total fixed costs + Total variable costs / Output
What is the formula for calculating the average cost (unit cost)?
The state of the economy when Gross Domestic Product (GDP) decreases for 6 consecutive months
What is a recession?