Examples of Economies of Scope
Several causes of economies of scope exist. In certain circumstances, a specific production method produces numerous outputs. Beef producers can sell both beef and rawhides from the cattle; by contrast, producing cattle for either beef or hides only would not be as lucrative. In other circumstances, production of a primary good is supplemented by obvious additives. Frequently, these additives can become saleable products. An airline that transports passengers might have unused cargo space, so it might decide to transport cargo as well as passengers. Numerous public school systems make their classrooms available after school hours for community programs.
Practical experience is an important foundation for economies of scope. Soft drink companies create numerous varieties of effervescent drinks, fruit juices, and sparkling waters. Familiarity with creating carbonated drinks creates benefits for the manufacturing of related beverages. Similarly, insurance companies offer both insurance and investment options; whole-life insurance is an ingenious blend of these two items in a single product.
