Economies of Scale - Lesson Plan: 1 x 1 hour lesson

A series of 'off the shelf' lesson plans and resources for use in the classroom. This lesson deals with Economies of Scale and is relevant to the following specifications:

• AQA: AS Module 1, 10.4
• Edexcel: AS Unit 2
• OCR: AS Units 2881, 5.13

Aim:

The aim of the lesson is to encourage students to think more deeply about how economies of scale arise and uses the electronics industry as an example. Most students should be familiar with the likes of PCs, DVD players, PlayStations, etc. and as such will have some understanding of the make up or component parts of such products, if not the technical understanding. A good additional resource will be the insides of an old computer - most schools'/colleges' IT departments will have such things. The aim is to serve as a visual resource to engender discussion and stimulate thinking as to how manufacturing processes work (albeit in a very simple manner!). Just how far students can take their thinking in this case will depend on the degree of support they receive. The Activity can be adapted easily to form the basis for group work as well as an individual activity, and can be used as a whole class discussion exercise.

Ultimately, students should be thinking of economies of scale as not just 'bulk buying', but have some appreciation of the scope for firms gaining benefits through being very large. Emphasis can be placed on the fact that the total costs of such firms are likely to be very large (the cost of sales for Sony, for example, in the year up to March 31st 2005 was $43.75 billion) but that the volumes that are being produced mean that such costs are spread over a large output.

Learning Objectives:

At the end of the lesson, students should understand the following:

• The meaning of the term economies of scale and its application to one industry
• The limitations of economies of scale in terms of the impact on consumers (standardisation, choice and so on)
• That some firms may not wish to benefit from economies of scale or that for some firms' economies are not an option because of the nature of the business
• That the minimum efficient scale has implications for competition and acts as a barrier to entry

Resources:

• PowerPoint Presentation - Economies of Scale [107 KB]
• Mind Map - Economies of Scale
• Activity - Economies of Scale
• PCs for research (not essential)
• The insides of an old computer
• Whiteboard/flip chart

Useful Links:

• Notes on Economies of Scale
• Economies of Scale - Virtual Developing Country

Lesson Structure:

1. Introduce the topic through the use of the PowerPoint Presentation and Mind Map. (15 minutes)
2. Issue the Activity - go through the case study drawing out the key points and encouraging discussion and questions and answers. (5 minutes)
3. Set questions - either as a group investigation or as an individual project. (20 minutes)
4. Draw together groups/individuals to discuss the outcomes of the investigation. (15 minutes)
5. Summarise the approaches on the board or on a handout produced by the next lesson. (5 minutes)