Economies of Scale | A-Level Economics Notes

These revision notes cover everything you need to know about Economies of Scale for A-Level Economics. They're designed for students studying AQA A-Level Economics, Edexcel A-Level Economics, and Edexcel International A-Level Economics. Written by Jaisul Naik, UCL Economics graduate and A-Level Economics tutor since 2017.

What are economies of scale?

Economies of scale occur when firms are able to reduce their long-run average costs as they increase output.

What are six types of economies of scale?

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• Risk-bearing: large firms can spread risk over a wider range of products, so there is less risk of an innovation failing.
• Financial: large firms can reduce their long-run average costs by accessing cheaper loans/ lower interest rates.
• Marketing: large firms can reduce their long-run average costs as one advertising campaign covers a wider range of product and stores.
• Technical: large firms can reduce their long-run average costs as one machine will be used to produce more output.
• Managerial: large firms can reduce their long-run average costs as one manager can oversee more work and output so the average cost of employing them is lower
• Purchasing: large firms can reduce their long-run average costs by bulk buying.

What are diseconomies of scale?

Diseconomies of scale occur when a firm's long-run average costs rise as output increases.