I decided to write what i am studying the theory of economic here because it may help me to understand more and memories them well during my busy schedule. in additional, i treat this as my journal which i can keep and will revive it after many years and read . I find that the economic theories are very interesting than i thought. I used to be an officer in a trading industry and an insurance industry for more than 2 years. It is quite useful for me to understand the theories better. Also, i had studied Principal of Account and Human factors of Geography. Some of their theories are almost similar to the economics. I still remember them since i was in secondary school. Many of my peers think the economics is just a boring subject to talk. i will not write these topics in ordering arrangement. I just pick interesting topics of economics to write only.
Economies Of Scale
Internal Economies of Scale has 6 factors which affect a development of firms/organisations. “Internal” means that these factors affect inside the companies.
Factor I – Commercial ( buying and selling): The firm will purchase stocks in a bulk and it will helps to decrease the input costs and will get a good profit from the output price. A gap between the input and output costs is quite big if goods in bulk are purchased commercially.
Factor II – Specialisation/Managerial: A firm hires right people who can give more benefits and more resources to the companies. For small firm, one officer will do multitask. For large firm, an officer will do on one task which will contribute more amounts of benefit to the large companies.
Factor III – Technical: A firm improves technology in plant and it will reduce a labour cost and will reduce the wastage
Factor IV – Financial: A firm ia able to meet bank requirements to take on loan. In additional, shareholders will invest on the firm to help it to improve better or maximize a profit.
Factor V – Risk Bearing: A firm is able to cover losses with its backup assets during bad time.
Factor VI – Social Economies: A firm will promote a good discount to consumers. The consumers will become regular buyers and it is easy for the firm to have good cash flow. The firm give benefits to employees. The employees will work hard and receive good bonus.
External Economies of Scale has few factors only. It is outside the firm/organisation.
Economies of Information: Publication, Technical Journal and Central Research
Economies of Convention: Assembly of localisation
Diseconomies of Scale
Internal Disecnomies of Scale shows that how the firms are affected negatively inside.
Management Capacity – The mergers of 2 firms will have human and political clashes due to miscommunication and different systems.
External Diseconomies of Scale shows it affects negatively on the firm.
The location of the firm is overcrowded and it may affect on the market.
The firm makes pollution and the pollution will affect it.