Economies of scope (SC)
If making two goods separately costs more than making them together, there are economies of scope. Pick an example or enter costs to work out the degree of 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.
| Separate total | 90 | 52 + 38 |
|---|---|---|
| Saving | 10 | 90 − 80 |
| SC | 0.125 | 10 ÷ 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
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