Scale of Production : How it determinants

Scale of Production

By scale of production we mean, what should be the level and degree of production i.e. what quantity of output should be produced. The quantity of output influence the profit, if its profits are maximized at small scale the scale of production is small and if profits are maximized at large scale then the scale of production is large.

Determinants of Scale of Production

Financial Resources

Scale of production depends upon the financial resources of the entrepreneurs. If the entrepreneur has less resources he will be forced to start production at small scale because he is unable to purchase new modern and large machinery and excessive quantities of raw material. But if the entrepreneur has much resources or he is able to get credit from the bank easily them he will start production on large scale.

Ability of Entrepreneur

If the entrepreneur is educated and has vast experience of managing business he may start production at large scale and if he is not educated and had little experience about the business management, he cannot start production at large scale.

Technical Possibilities

Scale of production also depends on the method or technique of production. Generally there are two methods of production (a) Labour intensive method (b) Capital intensive method. If the method of production absorbs less capital and more labour that method is called labour intensive but if the production method absorbs more capital and less labour then it is capital intensive method. If entrepreneur adopts simple method (Labour Intensive) than scale of production will small and it he adopt capital intensive method, the production will be no large scale.

Nature of Work

Scale of production also depends on nature of work; some types of business are beneficial on small scale i.e. goldsmith, and zargari etc.

Extent of Market

If the market for a production is vast i.e. it s demand comes from far off places and in large quantities, large scale of production is beneficial and if the market is limited i.e. goods are sold and purchased locally then small scale of production is beneficial.

Means of Transport and Communication

Means of transport and means are developed and swift i.e. from factories to market than scale of production may be large otherwise the scale of production is small.