Chapter 7 Pages 72-73

Towards the end of the 18th century, England was thriving in a way it never had before. The Industrial Revolution had created large factories, monopolies and a rising middle class. Even the poor seemed to have more food, clothes and shelter. To many, this new era was unexplainable and considered to be a passing tide. In 1890, however, Alfred Marshall theorized that specialization and competition would lead to lower per-unit cost, and as a result, lower prices. This principle came to be known as external increasing returns, the foundation of economies of scale.