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Concept of External Diseconomies and its Types

Here we understand the Concept of External Diseconomies and its types in detailed.

Concept of External Diseconomies and its Types :
Meaning of External Diseconomies:
External economies are external to the firm. Just as, beyond a certain stage, when a firm expands in size and increases its scale of production, there arise diseconomies for it; in the same way beyond a certain stage, too much concentration and localisation of industries creates diseconomies which may be called as external diseconomies.
Now we will discuss about its types in detailed:
Types of External Diseconomies:
  1. The first is the difficulty associated with transportation. When a number of firms are located in a particular area, pressure is put on the transport system. There arise transport bottlenecks and delays in the matter of getting raw materials and sending the finished products.
  2. Expansion of industry in a particular area leads to high rents and high costs.
  3. Indiscriminate concentration of industries has given rise to the evils of the factory system. For example, air pollution resulting from the smoke of the chimneys has an adverse effect on the health of the people; industrial congestion, over-crowding, global warming, rise of slums, insanitary surroundings as also the moral and physical evils connected with its industrial unrest leading to strikes or lockouts etc. are result of the factory system and may be mentioned as External Diseconomies.
Concept of External Diseconomies
Types of External Diseconomies
transport bottlenecks
rising prices and cost of living slums and filth
unrest and social tensions
External Economies and Diseconomies- Types of External Diseconomies.
Tech writer at NewsandStory
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