Difference Between Economies of Scale and Economies of Scope

Economies of Scale

The term economies of scale refers to a situation where the cost of producing one unit of a good or service decreases as the volume of production increases.

Economies of scale arise when the cost per unit falls as output increases. Economies of scale are the main advantage of increasing the scale of production.

Alfred Marshall made a differentiating concepts of internal and external economies of scale. That is that when costs of input factors of production go down, it is a positive externality for all the firms in the market place, outside the control of any of the firms.… Read the rest

Why Competition may Sometimes be Helpful?

Market structures refer to a total number of businesses in the market, their share and extent of competition in those businesses. Competition is a crucial aspect which cannot be overlooked in business. This is because human needs are many but resources for satisfying them are limited. As a result, firms have to compete to ensure they provide required services at certain cost. The major objective to operate a successful business is to earn a profit. In this process, resources are deployed to generate profits and thus businesses have to allocate resources strategically to ensure maximum benefits are achieved. In some business models, competition is steep while in others, they serve as a monopoly.… Read the rest

Analysis of Joseph Schumpeter’s ‘Theories of Economic Development’

At the turn of the century, a period of strengthening the role of monopolies, increasing property differentiation of the population and the deepening of cyclical crises appeared the concept of an Austrian economist and sociologist Joseph Schumpeter.

Joseph Schumpeter was an economist and sociologist, he came into the history of economic science as a profound scholar of theoretical problems of entrepreneurship and evolution of socio-economic systems, as the historian of economic theory. His broad vision of the evolution of socio-economic processes still has influence on modern economic thought. He presented his understanding of the subject of economics and tried to combine economic theory, economic sociology and the history of economic analysis.… Read the rest

Cashless Economy – The Road Towards a Cashless World

A cashless economy is a system where payments are made by electronic means rather than using cash or check to pay for goods or services. In an economy that is “cashless”, a person would pay with plastic methods like credit cards, debit cards, or smart cards. This type of transaction electronically moves money from one account to another rather than using the traditional forms of exchanging printed currency or checks.

Woodfords Model of Cashless Economy

There has been much debate over Woodford’s model of a cashless economy by many experts in the field of economics. Most experts believe that although some of the ideas brought forth make sense, the model is still incomplete because, in real-world economics, central banks can affect nominal interest rates.… Read the rest

Benefits of Cost Volume Profit Analysis

Every organization needs to calculate future revenues in order to help the managers carry out their operations effectively. Cost volume is the approach used for this purpose. Cost Volume Profit analysis or CVP analysis helps in identifying the operating activity levels with a purpose to avoid any kind of losses and achieve profits. Moreover, it also helps the companies to plan their future operations and see whether their organizational performance is going on the right track or not. While conducting a business, the companies also have to face various risks and in order to counter those risks, CVP analysis is an effective tool.… Read the rest

Inflation: Meaning, Causes, and Effects

Inflation can be characterized as a rise in the general value level and therefore there is a fall in the estimation of cash. Inflation happens when the measure of purchasing power is higher than the yield of merchandise and ventures. Inflation additionally happens when the measure of cash surpasses the measure of enterprises accessible. Regarding whether the falling the estimation of cash will influence the elements of cash relies upon the level of the fall. Fundamentally, alludes to an expansion in the supply of money or credit with respect to the accessibility of stock and venture, bringing about higher costs. In this manner, expansion can be estimated as far as rates.… Read the rest