ECONOMICS OF SCALE - DYNAMICS OF DEVELOPMENT

What will happen to the economy of India after pandemic COVID-19?

Through which phase of economy, we have to go? Will our nation’s economy will come to stand still? At which rate does our economy will retrieve again? Before COVID-19 our country was going through a critical phase of economy and in present-day it is severely affected. According, to many experts it is suggested that our country will go 10 years back, if we are unable to recover this pandemic as earlier as possible. When we study the economy structure as well as population profile of our country, being a 2^nd ranked country in population across the world, we have a great scope to enhance in future. Because mechanism of economy is directly proportional to the population growth and their demand. Or we can quote - " Economies of Scale is guided by dynamics of Development whereas dynamics of development depend upon demand and supply and vice-versa". For example - Why can you now buy high-performance mobile phone at low price when a similar mobile phone used to be at higher cost just a few years ago? Why is it that the average market price of digital cameras and computers are falling all the time? This Is Due To The Exploitation In Scale Economics Which In Turn Have Reduced The Unit Costs Of Production As Well As Goods Are Feed To Consumers At Lower Price. WHAT IS SCALE OF ECONOMICS? Scale of Economic determines the % services to be provided within a Settlements Of Different Sizes. Provide Differing Services in Towns, Cities, And Metropolises Are More Often Complements For One Another, Not Substitutes. Size Of The Settlement - 1.Size Of The Settlement. 2.Distance Travelled. 3.Distance Travelled.

It is broadly classified into 2 categories- Internal Scale Of Economics- It is defined as the expansion within a given economic unit i.e., state, region and city. External Scale Of Economics- It is defined as the expansion in the size of a group of economic units.i.e, a city in a state, state in a country and so on……..

EXTERNAL ECONOMIC  CAN BE POSITIVE OR NEGATIVE Spatial proximity of towns or cities to each other could result in positive externalities. Thus, it is  referred as Agglomeration Economies. Whereas, congestion, pollution and negative other sources are referred as Negative Externalities Or Agglomeration Diseconomies. Thus, Agglomeration Economies is classified as-

Localization Economies- There are 3 source for it- 1.Labor Pooling. 2.Reduced costs of intermediate inputs for a given product. 3.Proximity contributing to better communication and faster spreading of innovation. Urbanization Economics- There are 3 source for it- 1.Access to a large market. 2.Access to a variety of specialized services available only in large cities. 3. Potential for cross-industry spillovers of knowledge and technology. Population affects the infrastructure of the settlement. In terms of Scale of Economics- Settlement- Industries. Population are the industrial inputs. Services like hospital, school, housing are the industrial output.

Economies Of Scale Are The Service Advantages That A Settlement Can Exploit By Expanding Their Population in long run.

THE HIERARCHY OF HOSPITAL AVAILABLE WITHIN DIFFERENT SIZES OF SETTLEMENT. For example , Why Air Fare For Mumbai To Delhi And Delhi To Kolkata Is Cheaper Than Air Fare For   Delhi To Guhwati And Delhi To Cochin?????

However, there is a finite upper limit in which a settlement can grow to achieve economies of scale. After reaching a certain size, it becomes a parasite for settlement and it become very tough and expensive to manage a gigantic settlement for a number of reasons, including its complexity, nature and operating inefficiencies. This undesirable phenomenon is referred to as "diseconomies of scale".

Innovation in new production technology is the primary driver, with scale of economies sometime being beneficial for productivity, and population growth usually coming at a cost to productivity.  Thus, government should be aware for expansion of publicly funded capital is approaching diseconomies of scale and recognize this cost to society.