what exactly are economies of scale? how do they come about, and what do they do exactly?

Question

what exactly are economies of scale? how do they come about, and what do they do exactly?

In: Economics

Answer 1

Economies of scale are like the “buying in bulk” of the business world. Sometimes it’s raw materials, where it works the same way as it does for you and I — buy a lot at once and get a discount.

It can also be things like taking advantage of things like hauling one pallet across the country costs $1000, but a truckload is only $12000 for 15 pallets. Or a similar thing for building a factory versus subcontracting.