Economies of scale

AN economies of scale situation is achieved when an increase in the scale of production decreases long-term average costs. In other words, the production cost per unit of the commodity produced decreases as the company expands its operation. This is because fixed costs such as machinery, building, administration and rent decrease as these are distributed across the many and additional outputs of the company.

Economics also informs us that "growth is a function of investment," of which there are two major sources: the government (public) and the private sector. But in a market economy such as ours, the main source of investment is the private sector. This is because the bulk of the nation's wealth is in the hands of the private sector.