Economies of Scale & Scope

Economies of scale "are the cost advantages that a business obtains due to expansion" measured as the decreased per unit cost as output increases (Wikipedia).

These economies can be due to:
  • Purchasing in larger quantities
  • Increased job specialization (managers and employees)
  • Financial borrowing power and access to lower interest rates
  • Marketing by spreading the marketing message across media

Economies of scope "refer to efficiencies primarily associated with demand-side changes of different types of products" (Panzar and Willig 1975; Wikipedia). As the number of products promoted is increased and broader media used, more people can be reached with each dollar spent.