Economies of scale Why can you now buy a high-performance laptop for just a few hundred pounds when a similar computer might have cost you over £2,000 just a few years ago? Why is the average price of digital cameras falling all the time whilst the functions and performance level are always on the rise? How can IKEA profitably sell flat-pack furniture at what seem impossibly low prices?

The answer is – economies of scale The answer is – economies of scale.  Scale economies have brought down the unit costs of production and have fed through to lower prices for consumers. Economies of scale are the cost advantages that a business can exploit by expanding their scale of production.  The effect of economies of scale is to reduce the average (unit) costs of production

Types of Economies of Scale Sort Card Exercise

An example of technological economies of scale - Crisps! http://www.tutor2u.net/blog/index.php/gcse-economics/comments/how-crisps-are-made-technological-economies-of-scale

Ferries! http://rhysdgriffiths.wordpress.com/2010/06/10/one-new-era-for-po-ferries/