I’m a GCSE economics student, hopefully wishing to persue the subject on till university.
I had a thought about ‘economies of scale’ today. The basic theory of course is that if (for example) a firm’s output grows, it can benefit from various ecos of scale.
But why do MARKETING economies exist? Why is it that a producer is willing to offer raw materials cheaper to a firm if it buys more? Is it just to keep the buyer ‘happy’ so that they ‘come again’?
I suppose you could argue that if they didn’t lower their prices, the manufacturor would just go elsewhere… but if all producers agreed on not lowering their prices (!!)..
Argh!! I kind of get it now… but please explain
because if you only sold like 10 items you wouldnt make that much, youd have to raise the price to cover costs… if you sold 100 items you know you have them sold and could charge a bit less cause you are getting a good chunk of money, also it brings customers back.