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GC
SE B
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ness
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Economies of Scale
GC
SE B
usi
ness
Stu
die
sEco
nom
ies
of
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leAs businesses grow they have higher costs but these costs can be spread over the large number of goods produced.
100 pins may cost 10p each to produce
1 million pins may
cost only 1p each to produce
GC
SE B
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ness
Stu
die
sEco
nom
ies
of
Sca
leThis happens because businesses are able to cut the costs of all the items needed to produce goods. The main Economies of scale are:
purchasin
g
marketing
technical
financia
lmanagerial
Click one of the above to find out more…
GC
SE B
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ness
Stu
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sEco
nom
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purchasing
GC
SE B
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ness
Stu
die
sEco
nom
ies
of
Sca
leA box of 24 tins of baked beans might cost a small retailer £9.60£9.60
40p TOTAL COST NUMBER OF TINS
= £9.60 24
Show hints
Show answer
HOW MUCH DOES EACH TIN COST?
GC
SE B
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Stu
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sEco
nom
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leA pallet of 10 boxes of tins baked beans might cost a medium sized retailer £48£48
20p
10 BOXES OF 24 TINS= ? TINS
TOTAL COST NUMBER OF TINS
= £48 240 Show hints
Show answers
HOW MUCH DOES EACH TIN COST?
240
GC
SE B
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ness
Stu
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sEco
nom
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of
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leA lorry load of 10 pallets of boxes of tins baked beans might cost a large retailer £360£360
15p TOTAL COST NUMBER OF TINS
= £360 2400
10 PALLETS OF 10 BOXES
OF 24 TINS
HOW MUCH DOES EACH TIN COST?
Show hints
Show answers
2400
HOW MANY TINS?
GC
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Review:
SMALL MEDIUM LARGE
NO OF TINS 24 240 2400
TOTAL COST £9.60 £48 £320
COST PER TIN 40p20p 15p
Fill table
GC
SE B
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marketing
GC
SE B
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Stu
die
sEco
nom
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of
Sca
le1000 flyers will cost about £30£30 to print and post
3p
TOTAL COST NUMBER OF FLYERS
= £30 1000
HOW MUCH DOES IT COST TO REACH EACH POSSIBLE CUSTOMER?
Show hints
Show answer
GC
SE B
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ness
Stu
die
sEco
nom
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leA newspaper advertisement may cost about £40000£40000 and may be read by 2 million people2 million people
2p
= £40000 2000000
TOTAL COST NUMBER OF READERS
HOW MUCH DOES IT COST TO REACH EACH POSSIBLE CUSTOMER?
Show hints
Show answer
GC
SE B
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ness
Stu
die
sEco
nom
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of
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leA television advertisement may cost about £50000£50000 to be screened and may be seen by 5 million people5 million people.
1p
TOTAL COST NUMBER OF READERS
= £50000 5000000
HOW MUCH DOES IT COST TO REACH EACH POSSIBLE CUSTOMER?
Show hints
Show answer
GC
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BIGBIG firms can afford to advertise on
TV to reach a large number of customers. The cost can be spread amongst all the customers.
SMALLSMALL firms cannot!
Review:
GC
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Stu
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technical
GC
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BIGBIG firms can afford to buy
expensive machinery and to build large factories to produce many goods. The cost can be spread amongst all the customers.
SMALLSMALL firms cannot!
GC
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SMALL MEDIUM LARGE
COST £50,000 £80000 £120000
OUTPUT 200000 400000 800000
COST PER GOOD 25p 20p 15p
= COST OF MACHINE OUTPUT
Show hint
Show answer
Review:
GC
SE B
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Stu
die
sEco
nom
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of
Sca
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financial
GC
SE B
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ness
Stu
die
sEco
nom
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Sca
leLarge firms able to negotiate cheaper finance deals…
SMALL BUSINESSINTEREST
LARGE BUSINESSINTEREST
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• ManagerialManagerial– Use of specialists – accountants, marketing,
lawyers, production, human resources etc.
This means a high wages and salaries cost which can be spread over the large number of goods produced so the cost
added to each of these is small.
