Question

Short notes:

Economics of scale.

Answer 1

Economics of scale are the cost advantages enterprises obtain from various facilities established due to basic industries in certain regions. Sometimes due to the advantage of many favourable factors for industrial development in certain areas, there is a concentration of industries in that area, called agglomeration. In these regions, industries develop not due to locational factors but due to economies of scale enjoyed because of the agglomeration of industries. Due to the development of basic industries, other ancillary industries which are complementary to each other also develop. For example, once the cotton textile industry develops in any region, ready-made garment-making industries, industries supplying dyes and chemicals, and industries producing materials like thread, buttons, laces, etc., grow. Due to such agglomeration, the industries in that region get more profit than their investment due to economies of scale such as cheap transport, labour, financial facilities etc. For example, transport companies give concessions. Hence, the cost of transportation decreases. Since industries in this region are complementary, it is easier to collect or supply goods from other industries in nearby areas. For example, dye-making industries supply dyes to the cotton textile industry, and the cotton textile industry supplies cloth to ready-made garment industries.