Scale of production is used to describe two types of business. Every firm must have to face this problem like what means of production should be chosen because production of everything depends on this factor. Any product can be produced by following two types:
Small Scale Production:
The type of business started with less amount of capital using simple and basic tools is called small scale production. Cobbler and barber are few examples.
Large Scale Production:
Starting a business with large amount of capital, using advanced technology and with the bulk of raw material is called large scale production. For examples: clothing industry, factory of sugar etc.
Following are the few factors from which we can determine the scale of production:
Quantity of Capital:
If in the business large number of capital is used than it will be large scale of production and vice versa.
Means of Transportation:
If the advanced means of transportation is used than the business will be large scale.
Demand for Good:
If there is greater demand of good, than it will be produce on large scale of production rather than small scale.
Advanced machinery must be used in large scale production. Basic tools cannot help in large scale production.
Scale of the business mostly depends on the abilities and skills of the owner of the business.