Question

Briefly explain the role economies of scale play in the formation of cities. Why might cities not exist without economies of scale?

Answer 1

Cities play a significant role in the development of an economy. There is a wider role for economies of scale in the cities formation. Cities and economies of scale are positively linked. Cities provide economies of scale, localisation, and agglomeration; they provide efficient services and infrastructure through concentration and density in transportation, human interactions, communications, power, sanitation, and water services. Moreover attract talents and skilled labor which helps in specialization in skills, knowledge, and management capabilities possible. It assists to achieve the economies of scale, urbanization, and agglomeration.

The survival of the cities is difficult without economies of scale. The economies of scale in production allow firms to produce goods more effectively compared to individual members. The comparative advantage principle helps to foster the trade and the development of cities. The cities cannot grow without efficient infrastructure, communications, services, and skilled labor forces