Diseconomies of Scale

Diseconomies of Scale

The diseconomies of the scale are a disadvantage to a firm or an industry or an organisation. This necessarily increases the cost of production of a commodity or service. Further it delays the speed of the supply of the product to the market. These diseconomies are of two types:

a.        Internal Diseconomies of Scale: and

b.        External Diseconomies of Scale

1. Internal Diseconomies of Scale

When the scale of production increases beyond optimum limit, its efficiency may come down.

2. External Diseconomies of Scale

The term “External diseconomies of scale” refers to the threat or disturbance to a firm or an industry from factor lying outside it. For example a bus strike prevents the easy and correct entry of the workers into a firm. Similarly the rent of a firm increases very much if new economic units are established in the locality.