Question

Describe two kinds of scale economies. What different implications do the two kinds of scale economies have for regional economic development?

Answer 1

Two kind of scale economies of scale are described below and second part of the question that is what difference Implications they have for regional economic development is also included in this.

1. External economies of scale - external economies of scale occurs when the size of the company creates the preferential treatment which happens mostly with the government like for example sometimes state government tries to attract the companies who offer most number of jobs by reducing the tax rates.

If we talk about implications for regional development is includes that many of the small companies which have the same type of business can cluster in the small area which help the in the development on the part of regional basis.

2. Internal economies of scale- in large organisations there is large number of production due to which internal economies of scale occurs. Like for example these large companies can take the production in bulk due to which the cost per unit decreases and profit increases.

For regional development Implications in inyernal economies of scale as i have given the example in the above explanation the good and services are available at a cheaper rate as cost per unit falls which results in development