economies of scale

1. ECONOMIES OF
SCALE

2.  Economies of scale refer to the cost advantages a company gains
with the increase in production. This happens because production
costs can now be spread over a large number of goods. The bigger
the size of a company, the bigger the more the cost savings with the
increase in production.
 Understanding economies of scale is important because of its effects
on a business’s production costs. Economies of scale create a
competitive advantage for larger entities by putting out more
production units and reducing their overall cost per unit

3. There are two primary types of
economies of scale:
Internal economies of scale: Originate within the company,
due to changes in how that company functions or produces
goods.
External economies of scale: Based on factors that affect the
entire industry, rather than a single company

4. Effects of economies of scale on
Production cost
• It reduces the per-unit fixed cost. As a result of
increased production, the fixed cost gets spread
over more output than before.
• It reduces per-unit variable costs. This occurs as
the expanded scale of production increases the
efficiency of the production process.

5. IMPERFECT
COMPETITION

6. A market structure where firms have the
ability to influence prices and output due to
some level of market power. Unlike in perfect
competition, where there are many buyers
and sellers with no individual influence over
prices.

7. Advantages of an imperfectly
competitive market:
 Allows sellers to dominate the market and
produce profits for their business and the
economy
 Creates barriers to prevent rival businesses from
entering the market and minimizes competition
 Enables sellers to impose a higher price on their
products, which increases profitability

8. Types of imperfect competition
include:
Monopolistic competition: is a type of market structure where many
firms sell products that are similar but not identical
Monopoly: is a market structure characterized by a single seller or
producer that excludes viable competition from providing the same
product.
Oligopoly: is a situation when there are only a small number of buyers
in a market.

9. Conditions that lead to imperfect
competition
A limited flow of cost and price information
Monopoly control of some suppliers
Collusion of sellers to keep prices high
Maintain discrimination by sellers among buyers based on the
buying power

10. INTERNATIONAL
TRADE

11. International trade refers to the exchange of goods and services between
countries. In simple words, it means the export and import of goods and
services. Export means selling goods and services out of the country, while
import means goods and services flowing into the country.
International trade supports the world economy, where prices or demand
and supply are affected by global events. For instance, the US changing
visa policies for software employees will impact the Indian software firms.
Or, an increase in the cost of labor in exporting countries like China could
mean you pay more for the Chinese goods in the US.

12. Countries go for trade internationally when there are not
enough resources or capacity to meet the domestic
demand. So, by importing the needed goods, a country can
use their domestic resources to produce what they are good
at. Then, the country can export the surplus to
the international market. Primarily, a nation imports goods
and services for the following reasons:

13. Price – If foreign companies can produce or offer goods and services
more cheaply, it may be beneficial to go for foreign trade.
Quality – If the companies abroad can offer good and services of
superior quality. For instance, Scotch Whiskey from Scotland is considered
to be superior. Scotland exports around 37 bottles of Scotch per second.
Availability – Suppose it is impossible to produce that product
domestically, like a special variety of fruit or a mineral. For instance,
Japan has no natural oil reserves, and thus, it imports all its oil.
Demand – If a demand for a product or service is more in a country than
what it can domestically produce, then it goes for import.

14. Three types of international trade
Export Trade
 Import Trade
Entrepot Trade