So the big two economies of scale that you need to know are purchasing economies of scale and technical economies of scale. Let's quickly go through what economies of scale are. So economies of scale is when there is a reduction in the average unit costs. But that will happen as output increases, as output grows. At the same time, it's likely means the size or the scale of the business has increased. So let's go through purchasing economies of scale. So purchasing economies of scale is when, as the business grows, output grows, output increases. Therefore, the business will buy more raw materials or components from the supplier. And because they're buying more raw materials or components from their supplier, they're able to negotiate a better deal. And they can negotiate a better deal with their suppliers because... The business has become more important to the supplier because they are buying more raw materials or more components from the supplier. Therefore, they negotiate a cheaper price. Let's go for an example of purchasing economies of scale. Let's take ChocSesh, the chocolate company. So ChocSesh, they make chocolates. They need to buy cocoa from their supplier. Let's take an example of when they're a small business and then as the business grows. When they're a small business, they buy three tons of cocoa from their supplier. And they buy these three tons of cocoa from their supplier for So therefore, divided by the units, so three tons, comes to per ton. So their average unit cost is per ton. As the business moves from a small business to a large business, therefore it's grown, its output is increasing. it's now I just buy nine tons of cocoa for But it's paying a large amount now, However, that's when you measure it as the average unit cost is lower because divided by nine is So the average unit cost is per tonne. It used to be per tonne. But because Chop Sesh has become more... important to its supplier, to where it buys its cocoa from. It's able to negotiate a cheaper price on average per tonne. And in this case, it's now paying per tonne. So when it buys nine tonnes, is the price it's paying as its total costs. Average unit costs have therefore reduced by per tonne. This is an example of an increase in efficiency. So it's very likely purchasing economies of scale will lead to an increase in efficiency because less inputs are needed to achieve the same output. So there's less waste. Waste in this case is cash. Other things to think about when you're thinking about purchasing economies of scale. As output increases, as we said before, you're likely to have more negotiating power. But you might be able to use your negotiating power beyond just... the average unit cost. You might be able to also negotiate delivery times that favour you. You might be able to negotiate longer trade credit. And if you negotiate longer trade credit, it's likely to mean that you're going to have a higher cash flow because you're not having to pay out the cash as quickly to your supplier. So I hope that helps with purchasing economies of scale. Now let's look at technical economies of scale. So technical economies of scale. Technical economies of scale mean as the business grows, it's likely to mean they have more finances or availability of finance. That could be in the form of debt or equity. For more information on debt and equity, click the card up there. So as the business grows, they have more finances or availability to finance. And therefore, they're able to buy more quantity or quality of capital. Capital being machines or robots or vehicles. So as they grow, they get more finances and they're able to buy a better quality or more quantity of capital. And because they buy this extra capital, it's going to mean their productivity is likely to increase. And as your productivity increases, your average unit costs are likely to fall. Remember, productivity. When productivity is increasing, it means the ratio of output. from the same input has increased. The ratio of output, so what you get at the end, has increased from putting exactly the same amount in. So an example of technical economies of scale. Let's look at ChocSesh. So ChocSesh is able to buy a new chocolate moulding machine. Before, 3,000 chocolates were moulded in 10 hours. So before it had the chocolate moulding machine, 3,000 chocolates were molded in 10 hours. Now it buys this piece of capital, this machine. Now 9,000 chocolates are molded in 10 hours. So a massive increase in productivity. But also it means that because the cost per chocolate molded has fallen, therefore the average unit costs have fallen. So you're getting economies of scale in the form of technical economies of scale. Other things to be aware of with respect to technical economies of scale. Well, it's often associated with that movement from job production to flow production. So if you have the opportunity and it makes sense for the question, feel free to bring this in. I hope that helps with economies of scale for both purchasing economies of scale and technical economies of scale. Remember there are other economies of scale and you can find out more information if you click on the card up there right now. Other than that, I hope to see you at the next video and have a lovely day.