EXTERNAL ECONOMIES AND DISECONOMIES. these are terms in economics that can be used to measure the advantages and disadvantages of localizing a firm or business in a certain area or location.
what is external economies?
External economies are the benefits a firm derives from concentration or localization of industries in a particular area.
In other words, these are the benefits a firm enjoys from increase in its output and decrease in cost as a result of the kind of assistance it derives from other firms within the same location.
External economies are mostly derived from industrial estates where there are many firms operating in the same location.
what is diseconomies,
diseconomies on the other hand, refer to the disadvantages a firm experiences when the activities of one or more industries increase the cost of production or output of that firm within the same location.
The advantages and disadvantages of localization of industries is also applicable to external economies and diseconomies as discussed in this post