Economics

What is Diseconomies of Scale and How its affects organisation

The diseconomies of the scale are a disadvantage to a firm or an industry or an organisation. This necessarily increases the cost of production of a commodity or service. Further it delays the speed of the supply of the product to the market.

These diseconomies are of two types:

a) Internal Diseconomies of Scale
b) External Diseconomies of Scale

Internal Diseconomies of Scale:

When the scale of production increases beyond optimum limit, its efficiency may come down.

External Diseconomies of Scale:

The term “External diseconomies of scale” refers to the threat or disturbance to a firm or an industry from factor lying outside it.For example a bus strike prevents the easy and correct entry of the workers into a firm.Similarly the rent of a firm increases very much if new economic units are established in the locality.

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