eli5 bulk orders

Question

How does buying in bulk often cheapen the final price?

In: 3

Answer 1

A semantic correction maybe, but an important one.

Buying in bulk rarely, if ever cheapens the final price. But it does often lower the per unit cost.

And that is mostly just because there are fixed costs and variable costs. The fixed costs are usually set per order, the variable costs are usually set per unit.

So if your fixed costs are $100, and your variable costs are $10. Then your final price for 1 unit is $110. ($110/unit). But if you order 100 units your final price is $1100 ($11/unit).

As you can see, buying 100 units is much much cheaper per unit than buying 1.