Experience Curve
Concept that costs decrease as volume increases (learning effect).
Formula
Unit Cost ↓ as Cumulative Output ↑
Real World
Tesla used the experience curve aggressively — the cost of its Model 3 battery pack fell from around $190/kWh in 2017 to under $110/kWh by 2022 as cumulative production volumes grew, enabling lower prices and higher margins.
Exam Focus
Do not confuse the experience curve with economies of scale alone — credit answers that also mention process learning, workforce efficiency, and innovation.
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