Economy of Scope Example

Economy of scope a concept in economics refers to situation where a manufacturing concern or a company find it cheaper to produce two or more products together rather than separately. It can be better explained with the help of an example suppose an ice cream parlor owner instead of selling only ice cream also decides to sell cold drinks, cold coffee, pastries and other such refrigerated items which in turn will result in more sales while the cost would be more or less same as the owner of parlor does not require any additional investment or cost in order to sell other products.

Hence one can see that Economies of scope is beneficial only when the company does not have to incur any substantial additional expense in order to produce other products, and also when the products which are being produced are related in some way or other to the product which is being sold to the current customers. Hence a vegetarian specialty restaurant cannot expect to increase its sales by selling non vegetarian food items.

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