Economies of scale - Revision history

Ahoussney at 14:12, 6 March 2015

2015-03-06T14:12:06Z

Ahoussney at 14:11, 6 March 2015

2015-03-06T14:11:50Z

Ahoussney: Created page with "Economies of scale are factors that cause the average price of something to fall as the amount produced increases. A farmer growing 10 acres of wheat, for example, buys a..."

2015-03-06T14:10:40Z

Created page with "Economies of scale are factors that cause the average price of something to fall as the amount produced increases. A farmer growing 10 acres of wheat, for example, buys a..."

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[[Economies of scale]] are factors that cause the average price of something to fall as the amount produced increases. A farmer growing 10 acres of wheat, for example, buys a combine to harvest the wheat, a farmer growing 100 acres of wheat also buys a combine, the farmer growing 100 acres of wheat can spread out the cost of the combine over more wheat, bringing down the cost of production. This way of thinking about [efficiency]] relies on specialization, rather than diversification, and can often come at the expense of [[economies of scope]] - which are based on the diversity and variety of an organization. The benefits of economies of scale are also limited by [https://en.wikipedia.org/wiki/Diseconomies_of_scale diseconomies of scale], in which larger companies' costs of production are actually higher than smaller companies. Even when they depress costs, economies of scale might lead to lower profits for a farmer, since lower costs often come together with lower quality, leading to drastically lower potential sale prices, and because selling a huge quantity of a commodity usually requires one or more "middlemen".

In agribusiness, economies of scale are the cornerstone of the [[agro-industry|agro-industrial]] model of farming. In this model, farmers focus on a small number of farming activities and make huge investments (often borrowing large amounts of capital) in specialized equipment and infrastructure to support their chosen specialty. To justify the high expenses and repay the loans, farmers must often grow their operations to the absolute limit of what their new infrastructure can support, frequently leading to the need to borrow new money to make new investments in ever larger equipment.

Since the early 1930's North American farm policy has been designed to force farmers to follow this philosophy by specializing on a narrow range of agriculture and increasing the size of their operations.

==The highly leveraged position of the "scaled up" farmer==

==The Amish example==

==Re-imagining infrastructure and equipment costs==
*Useing older equipment for major savings (and marrying that with new, cheaper technologies)
*Creating a market for specialized farm service providers who make the investments in machinery but serve several farms
*Calculating total costs of a product, including middle-man-markup, transportation and distribution costs and retailer's cut, as opposed to commodity prices

==Diseconomies of scale in agriculture==

@@ Line 1: / Line 1: @@
 [[Economies of scale]] are factors that cause the average price of something to fall as the amount produced increases. A farmer growing 10 acres of wheat and a farmer growing 100 acres of wheat both buy a combine, the larger farmer can spread out the cost of the combine over more wheat, bringing down the cost of production.
-This way of thinking about [efficiency]] relies on specialization, rather than diversification, and can often come at the expense of [[economies of scope]] - which are based on the diversity and variety of an organization. The benefits of economies of scale are also limited by [https://en.wikipedia.org/wiki/Diseconomies_of_scale diseconomies of scale], in which larger companies' costs of production are actually higher than smaller companies. Even when they depress costs, economies of scale might lead to lower profits for a farmer, since lower costs often come together with lower quality, leading to drastically lower potential sale prices, and because selling a huge quantity of a commodity usually requires one or more "middlemen".
+This way of thinking about [[efficiency]] relies on specialization, rather than diversification, and can often come at the expense of [[economies of scope]] - which are based on the diversity and variety of an organization. The benefits of economies of scale are also limited by [https://en.wikipedia.org/wiki/Diseconomies_of_scale diseconomies of scale], in which larger companies' costs of production are actually higher than smaller companies. Even when they depress costs, economies of scale might lead to lower profits for a farmer, since lower costs often come together with lower quality, leading to drastically lower potential sale prices, and because selling a huge quantity of a commodity usually requires one or more "middlemen".
 In agribusiness, economies of scale are the cornerstone of the [[agro-industry|agro-industrial]] model of farming. In this model, farmers focus on a small number of farming activities and make huge investments (often borrowing large amounts of capital) in specialized equipment and infrastructure to support their chosen specialty. To justify the high expenses and repay the loans, farmers must often grow their operations to the absolute limit of what their new infrastructure can support, frequently leading to the need to borrow new money to make new investments in ever larger equipment.

← Older revision		Revision as of 14:11, 6 March 2015
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−	[[Economies of scale]] are factors that cause the average price of something to fall as the amount produced increases. A farmer growing 10 acres of wheat~~, for example, buys a combine to harvest the wheat,~~ a farmer growing 100 acres of wheat ~~also buys~~ a combine, the farmer ~~growing 100 acres of wheat~~ can spread out the cost of the combine over more wheat, bringing down the cost of production. This way of thinking about [efficiency]] relies on specialization, rather than diversification, and can often come at the expense of [[economies of scope]] - which are based on the diversity and variety of an organization. The benefits of economies of scale are also limited by [https://en.wikipedia.org/wiki/Diseconomies_of_scale diseconomies of scale], in which larger companies' costs of production are actually higher than smaller companies. Even when they depress costs, economies of scale might lead to lower profits for a farmer, since lower costs often come together with lower quality, leading to drastically lower potential sale prices, and because selling a huge quantity of a commodity usually requires one or more "middlemen".	+	[[Economies of scale]] are factors that cause the average price of something to fall as the amount produced increases. A farmer growing 10 acres of wheat and a farmer growing 100 acres of wheat both buy a combine, the larger farmer can spread out the cost of the combine over more wheat, bringing down the cost of production.
		+
		+	This way of thinking about [efficiency]] relies on specialization, rather than diversification, and can often come at the expense of [[economies of scope]] - which are based on the diversity and variety of an organization. The benefits of economies of scale are also limited by [https://en.wikipedia.org/wiki/Diseconomies_of_scale diseconomies of scale], in which larger companies' costs of production are actually higher than smaller companies. Even when they depress costs, economies of scale might lead to lower profits for a farmer, since lower costs often come together with lower quality, leading to drastically lower potential sale prices, and because selling a huge quantity of a commodity usually requires one or more "middlemen".

	In agribusiness, economies of scale are the cornerstone of the [[agro-industry\|agro-industrial]] model of farming. In this model, farmers focus on a small number of farming activities and make huge investments (often borrowing large amounts of capital) in specialized equipment and infrastructure to support their chosen specialty. To justify the high expenses and repay the loans, farmers must often grow their operations to the absolute limit of what their new infrastructure can support, frequently leading to the need to borrow new money to make new investments in ever larger equipment.		In agribusiness, economies of scale are the cornerstone of the [[agro-industry\|agro-industrial]] model of farming. In this model, farmers focus on a small number of farming activities and make huge investments (often borrowing large amounts of capital) in specialized equipment and infrastructure to support their chosen specialty. To justify the high expenses and repay the loans, farmers must often grow their operations to the absolute limit of what their new infrastructure can support, frequently leading to the need to borrow new money to make new investments in ever larger equipment.