It refers to the economies or benefits that a firm acquires internally due to the growth of scale of production. It is merely enjoyed by a specific firm and not by all the firms in the business.
Internal economies may be categorized into following:
Technical economies: whenever a firm raises its scale of production, it becomes possible for it to make utilize of modern technology and superior method of production. As an outcome per unit cost of production goes down. Likewise large firm has mechanical benefit of using large machines.
Managerial economies: a big scale firm can afford to hold competent and efficient managers. Management is sub-divided beneath separate functions. Division of labor accordingly can enhance the effectiveness and decrease the cost of production.
Marketing economies: A big scale firm has an individual marketing department. Marketing of finished product can be completed economically. It can expend a big amount on publicity and advertisement.
Financial economies: A big sized firm has very high credit rating. It is in place to secure big loans at low rate of interest.
Economies of welfare: A big firm with its large resources, might run subsidized canteen, and give cheap houses, educational & medical facilities for the families of workers and clubs exterior the factory.
External economies of scale:
Economies of concentration: It refers to localization of localization of big number of firms generating similar goods. As an outcome firms get different kinds of benefits.
Economies of information: When numerous firms of an industry are recognized at one place, one might find publications of helpful information regarding that industry, as very helpful. The information might associate to new inventions, new markets, and price prevailing at various markets, position of demand in various markets and so on.
Economies of raw material: Plants located in isolated spot will have to sustain enough buffer stock of raw material. Though if many firms are located in locality raw materials are easily obtainable.
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