Talk:Economies of scale/Archives/2012

Reason for creating page
See the talk page of Returns to scale for the reasons for creating this page. Wikikob 16:15, 12 November 2006 (UTC) just checking... —The preceding unsigned comment was added by Special:Contributions/ (talk)

Start-class
I gave this a start-class rating based on its length and some grammatical errors. Unfortunately, I have little time to improve this myself, but anyone wishing to do so may of course do so. 74.132.62.250 23:52, 14 November 2007 (UTC)

It is rather odd to use the term "increasing returns to scale" for a short run expansion with fixed costs. Check out Nicholson or other standard undergraduate micro text. Increasing returns to scale is usually treated as synonomous with economies of scale and the term "increasing returns" (without "to scale", by analogy with "diminishing returns") is used for the idea mentioned. This could be increasing returns to labor, or increasing returns to output, but "scale" is explicitly reserved by most micro teachers for the long run choice of plant size or other capacity decision. Jekmark (talk) 22:27, 14 January 2008 (UTC)

rate vs volume of output
The distinction between rate of output for economies of scale and total volume (over all time) for learning by doing is important. But economies of scale generally refers to situations where increasing the rate of output decreases the cost per unit. The Law of diminishing returns applies at different levels of production. For instance, if a company produced one car per day, their cost per car would probably be much higher than if they produced 20000 similar cars per day. But the cost per car would likely increase if they tried to produce 1 million cars per day. C RETOG 8(t/c) 20:52, 20 August 2008 (UTC)

On Fixed Costs vs. Initial Costs and Marginal Cost
The example given (and the rest of the article) suggests that Fixed Costs are equivalent to Initial Costs. Fixed Costs relate to costs incurred per period by the firm irrespective of output whereas Initial Costs relate to one-time costs of setting up the firm. Though Initial Costs can be translated into a form of fixed cost by borrowing, the example given may not be clarifying this. Even so, we could have several other fixed costs (e.g: salaries instead of wages) other than those arising from borrowing Initial Costs.

Also, it is stated that the marginal cost of production decreases as these initial costs (which we take as implying fixed costs) are spread over a higher volume. However, only the average cost comes down in this scenario, the fixed costs do not have any bearing on the marginal cost - the additional fixed cost of producing one another unit is zero. Therefore, marginal cost=marginal variable cost only.

Would like to know the author's views on this. If there are no contrary views, then I could make the modification in the article itself in a few days.

122.167.193.161 (talk) 23:44, 20 August 2008 (UTC)Lenin

Before considering "Economies of Scale" we need a definition of "Scale Changes". Scale changes mean proportionate changes in all factors of production.

I agree with the above comment about marginal cost.

It is common to see people mix Economies of Scale (strictly Long Run) with reduced Average Total Cost through increased output in the Short Run*, which happens when fixed costs are spread over more units of output. In the short run the shape of the cost curve is determined by initially increasing, then decreasing, (marginal) returns to a factor (labour, in the UK!), often called "The Law of Diminishing returns" sometimes "The Law of Variable Factor Proportions" (contrast with scale changes where all resources change proportionately).

(*roughly, that period of time for which at least one factor of production is fixed)

Robert Slack (talk) 21:22, 9 February 2010 (UTC)

Suggesting move to "Economies of scale"
I have always, in my UK-based education, heard and used the plural of economy in the term. I suggest a move to economies of scale. —Preceding unsigned comment added by 88.83.110.216 (talk) 13:13, 20 January 2009 (UTC)

Dis-economies of Scale
The figure shows that there is a point at which increasing output results in higher unit cost increasing the LRAC and the article covers this in, "Typically, because there are fixed costs of production, economies of scale are initially increasing, and as volume of production increases, eventually diminishing, which produces the standard U-shaped cost curve of economic theory."

While not exhaustive, the reasons for LRAC reductions are good illustrations. Seems to me that the article would be improved if a few reasons for the reversal should also be offered. —Preceding unsigned comment added by Johnny.cache (talk • contribs) 15:15, 28 January 2010 (UTC)

Economies of Scale versus Returns to Scale
Economies of scale and returns to scale are related concepts. Returns to scale answers the question what effect will a proportionate change in inputs have on output? For example if we double inputs will double, more than double or less than double output. Economies of scales compares changes in output to costs. For example if we double output do costs double, more than double or less than double. There is no requirement that the changes in inputs that caused output to change be proportionate. For this reason increasing returns to scale. are simply a special case of economies of scale--Jgard5000 (talk) 18:39, 18 July 2010 (UTC)jgard5000--Jgard5000 (talk) 18:39, 18 July 2010 (UTC) See Pindyck & Rubinfeld, Microeconomics 7th ed. p. 246.

Due to expansion?
In the first line the article talks about economies of scale occurring due to expansion. That's just one type of EoS and its known as Enlargement economies of scale. I think its wrong to narrow the article down so early when we must take Purchasing, Technical, Marketing etc.. lots of other types of economies of scale into account. — Preceding unsigned comment added by 62.49.220.177 (talk) 18:30, 6 December 2011 (UTC)