Economy of scale is a medium where an organization achieves better result of lower costs with an increase in production and scale of operations. In simpler terms, it is said to be “the higher the production, the lower the cost”.
This is specifically true for those cases where the fixed cost component such as capital cost of installation and equipment, etc. is high. In such condition, a higher output simply translates to lower cost per unit item.
Diseconomy of scale is just opposite to the economy of scale. Here, items are manufactured at higher per unit cost, that is, the economy of scale does no longer work at higher production. This may be due to higher transportation or storage cost of products
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