Economics·Integration, economies & diseconomies of scale · NSSCO 5.4
Integration, economies & diseconomies of scale
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In this lesson we ask why some firms grow huge while others stay small. First we learn how firms grow by joining together — integration — and meet its three types: horizontal, vertical and lateral. Then we discover the big reward for growing: economies of scale, where average cost falls as a firm gets bigger. But grow too far and average cost rises again — diseconomies of scale. We draw the famous U-shaped cost curve to show both, weigh how they affect business costs, and finish by asking why firms come in so many different sizes, from a giant Namibian mine to a small spaza shop.
What you'll learn in this lesson
By the end you should be able to (NSSCO Economics 5.4):
- Define and identify the different types of integration
- Explain and illustrate the various economies of scale
- Explain and illustrate the various diseconomies of scale
- Discuss how economies and diseconomies of scale affect business costs
- Discuss the main reasons for the different sizes of firms (size of market, capital, organisation) and the factors influencing the size of a firm
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Miss Hilma and Mike talk through the whole topic — with the figure and working drawn live.