CAIE IGCSE Business Studies 4.4.2 economies and diseconomies
Practise scale questions by defining economies, naming types and explaining both benefits and diseconomies as a firm grows.
- Syllabus
- 2027–2029
- Course
- Business 0264
Exam points
- Define economies of scale as reductions in average cost when a business grows.
- State economies such as purchasing, technical, financial, marketing or managerial.
- Explain diseconomies such as poor communication, weak coordination or loss of control.
4.4.2—Economies and diseconomies of scale question 1
[Maximum number: 4]
TBX manufactures high-quality steel which is used to build railways. The method of production used allows TBX to benefit from economies of scale. The business holds a high level of inventory including iron ore. The Managing Director knows business activity could have an impact on the environment and is considering ways the business can contribute to sustainable development.
Outline two possible economies of scale TBX might benefit from.
Economy of scale 1:
Economy of scale 2:
Award 1 mark for each relevant economy of scale (max 2).
Award 1 mark for each relevant reference to this business (max 2).
Points might include:
- Purchasing (economy) [k] for the iron ore [app]
- Technical (economy) [k] to manufacture steel [app]
- Managerial (economy) [k] helping contribute to sustainable development [app]
- Financial (economy) [k] so can have a high level of inventory [app]
- Marketing (economy) [k]
Other appropriate responses should be credited.
To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made.
The following words are likely to be appropriate for this question:
- Steel
- Railways
- Iron (ore)
- High level of inventory
- Sustainable development/impact on environment
- High-quality
Other appropriate examples can be credited.
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