In economics, the reduction in costs per item (unit costs) that results from large-scale production. The high capital costs of machinery or a factory are spread across a greater number of units as more are produced. This may be a result of automation or mass production. For example, there would sometimes be economies of scale present if an automobile manufacturer could manufacture automobiles at Ł5,000 per automobile if it produced 100,000 automobiles per year, but at Ł4,000 per automobile if it produced 200,000 automobiles per year. See also external economies of scale.
In business, economies of scale are usually considered in relation to specific areas of the production process, which may be technical, managerial, marketing, finance, and risk. Economies of scale can also be produced when firms that need similar services locate together, sharing the costs of their services; for example, on industrial estates. In achieving economies of scale, many factors must be considered, not least of which is the demand for a particular product.