Definition
- Technical economies
- Technical economies are savings from larger plant and machinery: bigger, more specialised equipment turns out each unit with fewer inputs, so a larger factory can produce at a lower average cost than a smaller one.
Example
Can you think of an example of technical economies?
The material in a pipe depends on its circumference, while the volume it carries depends on its cross-section. A pipe using twice the material carries four times the volume, so a bigger chemical plant makes each unit more cheaply.
Test yourself
Can you name five internal economies of scale?