Industrial agglomeration occurs because of economic phenomenon known as economies of scale.
Agglomeration refers to that phenomenon of clusters which is used in the business activity as a result of firms which are located close to each other.
Agglomeration can also be described as a process which concentrates on the economic activity in one place to make businesses more productive.
Economies of scale are the cost advantages which are reaped by companies when production of the companies becomes efficient.
Companies can also achieve economies of scale by increasing production and lowering their costs. This happens because costs of industries are spread over a larger number of goods. Costs may be both fixed and variable.
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