Day 58 – Q 1. In the parlance of production of goods, what do you understand by the term ‘economies of scale’? How does it affect the location of industries? Discuss with the help of suitable examples. (10 Marks)

1. In the parlance of production of goods, what do you understand by the term ‘economies of scale’? How does it affect the location of industries? Discuss with the help of suitable examples. (10 Marks)

माल के उत्पादन की भाषा में, ‘पैमाने की अर्थव्यवस्था‘ शब्द से आप क्या समझते हैं? यह उद्योगों के स्थान को कैसे प्रभावित करता है? उपयुक्त उदाहरणों की सहायता से चर्चा कीजिए।

Approach

Candidates need to write and explain the economic of scale with production of goods point of view. And with suitable example discuss how it affect the location of the industry. 

Introduction 

Economies of scale occur when a company reaches a certain level of production where the cost of production will not be increasing, instead it is reduced. Such a situation takes place when products are produced in bulk. In other words, the cost of production is reduced with items produced in bulk.

Body 

Production of goods at economic of scale impacting the location of industries:

• Economies of scale occurs when more units of a good or service can be produced on a larger scale that needs the large landscape for industries for example recent Ola electric mobility vehicle manufacturer, based in Bangalore. Its manufacturing plant is located in Krishnagiri, Tamil Nadu. 
• External economies of scale can also be realized whereby an entire industry benefits from a development such as improved infrastructure. For example at large amount of food processing unit needs high end infrastructure there are 22 Mega Food Parks are operational across India in states with suitable infra. 
• All fast-food chains and food joints are located in the same area of a certain city could benefit from lower transportation costs and a skilled labor force.
• Economies of scale not only benefit the organization that produces the goods. Consumers can enjoy lower prices. The economy grows as lower prices stimulate increased demand for example number of food joints are located at targeted consumers location like colleges, schools, IT park and hostels. 
• There are various inputs at affordable rate will enhance the economic of scale that result in the production of a goods for example jute mills in West Bengal, sugar mills in Uttar Pradesh, cotton textile mills in Maharashtra, and Gujarat are concentrated close to the sources of raw materials for this very reason.
• As the scale of production of a company increases, a company can employ the use of specialized labor and machinery, resulting in greater efficiency. For example location near to the good high quality machines can impact the industry. 
• With increasing profits and RoI due to the economic of scale from the goods companies needs a proper banking or investing environment So the areas with better banking facilities are better suited to the establishment of industries.

Conclusion

The location of the industry with respect to economic of scale at a particular place is the result of a number of decisions taken at various levels. There are various geographical and non geographic factors that facilitate this decision-making.