Its 3 am and i dont have the brain activity to understand anything anymore. Please be as patronising as possible.
In: 23
“economy” in this case means “cost savings”
Economy of scale is the idea that when you can do something in bulk, you can do it more cheaply.
Say you’re a baker. You can buy flour in bulk, ship it all over at once. Shipping once a month is cheaper than shipping once a week in small batches.
Then, you can get a massive industrial oven that lets you bake multiple loaves at once, and save money on electricity. Turning the oven on once per 20 loaves is cheaper than once per 2 loaves.
Tldr: Economy of Scale is the “get your money’s worth” principal of business.
Economy of Scope is the idea that if you can do more with your business, you can make more business.
Say you own a gas station. In theory, all you need is a small parking lot with the gas pumps installed, an attendant to keep things clean, and small building for the attendant.
But, that’s a awful waste of space. You have a whole building to work with. If you maybe sold coffee, a few snacks for people on the road, you could make a killing, and give the attendant something else to actually do.
Tldr: Economy of Scope is the “make the most out of what you have” principal of business.
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