Question

Give an example of an industry that thrives on an economy of scale. How has this helped the industry over time?

Answer 1

An economy of scale can occur when the cost per unit decreases and when the quantity of output increases. This leads to lower unit cost per unit that is produced. In short, when a company produces more items in a more efficient method then the unit cost will be lower. This occurs because the initial cost of the unit is distributed to a larger number of units.

A good example of an economy of scale is the business card industry done by Vista printing and marketing services. Vista is a high-quality printing company that provides printing services, marketing, and products to small businesses and customers around the globe. Customers can design and mail postcards and print business cards directly through Vista. Customers take advantage of lower prices with higher quantity purchase. Therefore, relating back to the economy of scale, the higher the output, the lower the cost. The cost of printing the card is the same whether you order 100 or 1000. However, there are significant cost savings for the customer when ordering the higher quantity of cards. An example of this; purchase 100 cards the cost is .05 per card, order 1000 cards and the cost declines to .02 a card and so forth.

Vista utilizes cutting edge and automated technology that has propelled the company into the hands of millions of consumers including myself. Just recently, without realizing this, I had entered into the economy of scale when trying to decide how many business cards to produce.