By scale of production we mean, what should level and degree of production i.e. what quantity of output should produced. The quantity of output influence the profit, if its profits are maximized at small size the scale of production is small and if profits are maximized at large scale then the size of production is large.
Determinants of Scale of Production
Level of production depends upon the financial resources of the entrepreneurs. If the entrepreneur has less resources he will forced to start production at small size . Because he unable to purchase new modern and large machinery and excessive quantities of raw material. But if the entrepreneur has much resources or he is able to get credit from the bank easily them he will start production on large size.
Ability of Entrepreneur
If the entrepreneur educated and has vast experience of managing business. He may start production at large level and if he not educated and had little experience about the business management, he cannot start production at large size.
Scale of manufacture also depends on the method or technique of production. Generally there are two methods of production (a) labour intensive method (b) Capital intensive method. If the method of production absorbs less capital and more labour that method called labour intensive. But if the production method absorbs more capital and less labour then it capital intensive method. If entrepreneur adopts simple method (Labour Intensive) than amount of production will small and it he adopt capital intensive method, the production will be no large scale.
Nature of Work
Range of manufacture also depends on nature of work; some types of business are beneficial on small scale i.e. goldsmith, and zargari etc.
Extent of Market
If the market for a production vast i.e. it s demand comes from far off places and in large quantities, large scale of production is beneficial and if the market is limited i.e. goods are sold and purchased locally then small level of production is beneficial.
Means of Transport and Communication
Means of transport and means developed and swift i.e. from factories to market than size of production may large otherwise the size production small.