Economies of scope (SC)

Illustrative numbers — not real plant costs; units are arbitrary.

SC = (separate total − joint) ÷ joint0.125 + Economies of scope — making them together is cheaper

The denominator is the joint cost, not the separate total.

SeparateGood 1 52Good 2 38TogetherDenominator 80saving +10
Separate total9052 + 38
Saving1090 − 80
SC0.12510 ÷ 80

If making two goods separately costs more in total than making them together, there are economies of scope. The saving divided by the joint cost is the degree of economies of scope (SC): positive means economies, negative diseconomies. It is unrelated to economies of scale.

Not in this calculation

  • SC changes with output — one output level only
  • Estimating an actual cost function
  • The production possibility frontier
  • Any link to economies of scale — they are unrelated
  • Real figures or joint-production cases from the power industry

Using the example values

Tool: Renuary (CC BY 4.0) · Numbers are examples. Method and limits on the original page.