Economies of Scale | IBDP Business Management

Economies of scale is one of those topics that crosses over from DP Economics into Business Management.

There are different types of economies of scale, but it represents a relationship between average cost per unit and the level of output.

Generally what happens as business grows, or scales, is that fixed costs can be spread over a larger number of units, reducing the overall cost of production. Efficiencies are also introduced, potentially reducing both fixed and variable cost per unit.

Economies of scale can be both internal and external, and there are a number of different ways in which they can be achieved. I will cover these in future shorts, so subscribe if you want to find out more.

You will encounter economies of scale in unit one of the DP Business Management course, but it is a good theory to revisit regularly, especially in extended responses. It is particularly relevant to the operations unit.