Returns To Scale

Returns to scale:

• A long-run concept
• It shows the proportion of change in output in relation to the proportion of change in input. (What you get out compared with what you put in).
• The long run curve is made up of lots of short-run curves.

There are different types of return to scale:

• Increasing returns to scale
• Constant returns to scale
• Decreasing returns to scale

They are ALL increasing, but by different amounts.

For example: a 10% increase in input…