Agglomeration economies or external economies of scale refer to the benefits fro m concentrating output and housing in particular areas

. If an area specialises in the production of a certain type of good, all firms ca n benefit from various factors such as: 1.Good supply channels 2.Supply of trained workers 3.Infrastructure built specifically for the industry Due to agglomeration economies, people and firms often concentrate in particular areas. For example, people tend to move to cities where is there is greater cho ice of jobs, social activities and specialist services However there is always the risk of diseconomies of scale, where firms become to o big and average costs start to rise

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