are changes in average costs because of changes in the mix of output
between two or more products. This refers to the potential cost savings from joint production – even if the products are not directly related to each other.
For example a company’s management structure, administration systems and marketing
departments are capable of carrying out these functions for more than one product. Warehouse facilities may be used to maximum advantage by storing a range of the company’s product lines.
In the publishing industry, there might be substantial cost savings from using a team of journalists to produce more than one magazine.
Further economies of scope occur when there are cost-savings arising from by-products in the
production process. An example would be the benefits of heating from energy production having a positive effect on agricultural yields.