explain how making more products that can be sold in a period can increase a com

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It is proposed: More products manufactured -> Increased economies of scale, cost per unit produced falls -> More products sold -> Revenue increases -> Production costs increase at a smaller rate than revenue increased -> Increased Operating Income The success of this iniative would rely on: -Any increase in supply being equally offset with increases in demand within the period. This ensures that stock held at the end of the period does not increase from stock held at the beginning of the period, or that a sudden supply excess of the good doesnt cause the price to fall, reducing Revenue - Demand for the product should be in excess of what the market is currently able to supply -The companys current production levels being below the threshold to maximise economies of scale. In this way, assuming the selling price remains constant, the opportunity to increase the gross profit mark up is available. Once these micro econominc factors are considered, the company should then include macro economic issues, such as the current position on the economic cycle, government policies and so forth, as well as other external issues (such as upcoming events that may signal changes in the market) before making a decision This tactic can also occur in a service companies: - Airlines can offer additional flights, or more seating on current routes to "increase production" - Universities can offer additional student placements

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