Ace the A Level Economics AQA Exam 2025 – Power Up and Conquer the Market!

Purchasing economies of scale refer to the cost advantages that a business experiences when it buys goods or services in bulk. When a company makes large purchases, it typically receives discounts or lower prices from suppliers since they are purchasing higher quantities. This bulk purchasing can significantly decrease the average cost per unit, as the fixed costs (like transportation or logistics) can be spread over a larger number of items. Consequently, this reduction in unit costs enhances the firm’s overall profitability and competitiveness in the market.

The other options do not accurately depict purchasing economies of scale. Cost reductions from technological advancements refer to an entirely different aspect of operational efficiency. Higher demand can lead to increased costs due to strain on production resources rather than reductions. Finally, while hiring additional workers may lead to increases in output, it does not specifically relate to the purchasing aspect of economies of scale.