Internal Economies of Scale
Cost advantages that arise from growth within a particular business, reducing average unit costs as output expands.
Formula
Average Cost = Total Cost ÷ Output
Real World
Amazon negotiates huge bulk discounts on packaging and logistics because it ships billions of parcels — its purchasing economies of scale mean it pays far less per unit than a small independent retailer ever could.
Exam Focus
Name the specific type of internal economy (e.g. purchasing, technical) when answering — generic answers score lower than those identifying the exact mechanism.
How well did you know this?