Internal and External Economies:

Scale of production helps us to divide the economy of firm or industry into two types.

Internal Economies:

In internal economies, we discuss the internal matters of firm or industry. For example: skills of an entrepreneur etc.This type is used to achieve more production of goods in low capital. The following are the different methods to achieve internal economy in business:

Commercial Economies:

In internal economies raw material should be purchased in bulk form because it will be available in little cost.

Financial Economies:

In this type we produce goods in large scale, so getting loans from banks are very easy.

Administrative Economies:

In large scale production well trained and skilled labor is used, instead of increasing the numbers of laborer.

By-products Economies:

In internal economies, the rest of the raw material can be used in producing low quality goods.

External Economies:

External economies are not related with any single firm or industry. From these economies all of the firms are benefited equally.

Facilities of Banks:

Bank always give priority to open there branches in commercial areas, so banks nearby helps to obtain loan.


Government gives the facilities to the production industries then new roads and railway tracks are built. These roads are really helpful to industries, to transport their products.

Research Centers:

Research centers are opened in the industrial areas, which are really helpful for industries to achieve the cheaper ways of production.

Repairing Centers:

Repairing centers help industries in the situations of any wear and tear of machines.


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