Lesson Notes By Weeks and Term - Senior Secondary 1

Scale of production

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Term: 2nd Term

Week: 3

Class: Senior Secondary School 1

Age: 15 years

Duration: 40 minutes of 2 periods each

Date:       

Subject:      Economics

Topic:-       Scale of production

SPECIFIC OBJECTIVES: At the end of the lesson, pupils should be able to

  1. Explain the meaning of scale of production
  2. Explain the internal and external economies of scale
  3. Explain the internal and external diseconomies of scale

INSTRUCTIONAL TECHNIQUES: Identification, explanation, questions and answers, demonstration, videos from source

INSTRUCTIONAL MATERIALS: Videos, loud speaker, textbook, pictures

INSTRUCTIONAL PROCEDURES

PERIOD 1-2

PRESENTATION

TEACHER’S ACTIVITY

STUDENT’S ACTIVITY

STEP 1

INTRODUCTION

The teacher reviews the previous lesson on division and specialization

Students pay attention

STEP 2

EXPLANATION

She explains the meaning of scale of production. She further explains the internal and external economies of scale

 

Students pay attention and participates

STEP 3

DEMONSTRATION

She discusses also the internal and external diseconomies of scale

Students pay attention and participate

STEP 4

NOTE TAKING

The teacher writes a summarized note on the board

The students copy the note in their books

 

NOTE

SCALE OF PRODUCTION

Scale of production simply means the size of a firm’s productive capacity. It is also called economies of scale.

The major aim of setting up a firm is to make profit at the lowest possible cost. It also refers to the size of operation adopted by a firm.

Scale of production can be:

 

SMALL AND LARGE SCALE OF PRODUCTION

 One man business is usually a small business while the corporation or joint stock companies, on the other hand, are usually large scale operations.

Small firms sometimes have no intention of changing their sizes.

The major characteristics that differentiates a small firm from a large one is tabulated below:

Characteristics

Small firms

Large firms

Employment

Have few workers

Have large workers e.g. Experts

Capital

only small Capital

Require large capital

Market

Have small markets subject to changes in demand.

Have extensive market where demand is high

Product or service

Produce flexible product design and can provide personal attention to customers

Practice standardization of products with no personal attention to individuals

Technique of Production

Employ simple techniques

Use techniques requiring heavy equipment

Economies of scale

Cannot easily take advantage of economies of scale

Can benefit from both internal and external economies of scale

Research and Publicity

May not have resources for research and advertisement

Undertake expensive research which permits further expansion

 

ECONOMIES OF SCALE 

By economies of scale, we refer to the growth of a firm or an industry resulting from expansion of the scale of productive capacity which leads to increase in output and decrease in the cost of production per unit of output. The two types are;

  1. internal economies and diseconomies
  2. external economies and Diseconomies

 

INTERNAL ECONOMIES AND DISECONOMIES

These are the advantages a firm derives from the expansion of its scale of production as a result of its own single efforts .As the size of the firm increases, there will be greater efficiency resulting in the fall per unit cost of output. This is also known as economies of large scale of production.

On the other hand, when the firm’s expansion leads to less efficiency and increase in the cost per unit of output, then the firm is suffering from internal diseconomies.

 

INTERNAL ECONOMIES OF SCALE OR THE ADVANTAGES A LARGE FIRM HAS OVER SMALL FIRMS.

  1. Technical / Technological Economies
  2. Financial Economies
  3. Marketing Economies
  4. Welfare Economies
  5. Training Economies
  6. Research Economies
  7. Managerial/ Administrative Economies

 

DISADVANTAGES OF LARGE FIRMS OR ADVANTAGES A SMALL FIRM HAS OVER LARGE FIRMS

  1. Small scale firms require little capital than large firms that requires huge capital
  2. Small scale firms can easily adapt to changes in economies conditions than large firms
  3. Delay in policy making and management decision are frequent in large firms
  4. Control and supervision is easier in small scale firms than in large scale firms
  5. A large scale firm suffers from bureaucracy which affects production process than small firm

 

EXTERNAL ECONOMIES AND DISECONOMIES

External economies are the advantages a firm derives from increase in its  output and decrease in costs due to the helps the firm receives from other firms around its area of location, especially in the use of their products . External economies are more common in industrial estates.

External diseconomies, on the other hand, are the increased costs a firm will experience as a result of increasing its output resulting from external effects.

 

EXTERNAL ECONOMIES OF SCALE OR ADVANTAGES OF INTERDEPENDENCE / CLUSTERING OF FIRMS

  1. Inter dependence of industries
  2. Creation of employment opportunities
  3. Provision of social Amenities
  4. It leads to Innovation and Invention.
  5. More research is encouraged.
  6. There is healthy competition.
  7. There is development of organized markets.

 

EXTERNAL DISECONOMIES OF SCALE OR DISADVANTAGES OF CONCENTRATION OF FIRMS IN A LOCATION

  1. There is congestion
  2. There is shortage of social amenities
  3. It causes uneven development
  4. It causes pollution
  5. It causes migration

 

LIMITATIONS TO THE GROWTH OF A FIRM

  1. Size of the market.
  2. Availability of raw material.
  3. The nature of the firm’s product.
  4. Efficiency of the factors of production.
  5. The technical know-how.
  6. Managerial constraint
  7. Risk – bearing constraint

EVALUATION:    1. Define scale of production

  1. Explain the internal and external economies of scale
  2. Explain the internal and external diseconomies of scale

CLASSWORK: As in evaluation

CONCLUSION: The teacher commends the students positively