Marketing Economies

These economies arise because:

I. The advertising expenditure is generally found to have increased less than proportionately with scale. Consequently, larger the output, smaller the advertising cost per unit. Similar situation prevails in case of other types of selling activities.

II. The development and adoption of new models and designs involve considerable expenses in R&D. The larger the output, more thinly this R&D expenditure spreads over output.

c) Managerial Economies. Managerial economies arise because:

I. Larger the firms, greater are the opportunities for the division of managerial tasks. The division of managerial tasks helps managers to specialize in their own areas of responsibility, thus leading to greater efficiency.

II. Teamwork experience. By working in a team, the managers of large firms tend to acquire a more comprehensive outlook as well as a quicker and better decision-making ability.

III. In a large firm, with decentralization in decision-making, the delay in the flow of information is reduced, thereby increasing the efficiency of management.

IV. Modern managerial and organizational techniques. Large firms provide opportunities for the introduction of modern managerial techniques and organizational restructuring. These help the management to increase

efficiency. 

d) Transport and Storage Economies. Storage costs obviously fall with the increase in the size of output, as it provides the economies of increased dimensions (discussed already). The transportation costs, on the other hand, involve an Lshaped average cost curve-transport unit costs falling up to the point of the full

capacity and remaining constant thereafter.