|
|
INELASTIC SUPPLY: Relatively large changes in supply price cause relatively smaller changes in quantity supplied. Inelastic supply means that changes in the quantity supplied are not very responsive to changes in the supply price. An inelastic supply has a coefficient of elasticity less than one. You might want to compare inelastic supply to elastic supply, inelastic demand, and elastic demand.
Visit the GLOSS*arama
|
|
|
|
                           DECREASING RETURNS TO SCALE: A given proportional change in all resources in the long run results in a proportional smaller change in production. Decreasing returns to scale exists if a firm increases ALL resources--labor, capital, and other inputs--by a given proportion (say 10 percent) and output increases by less than this proportion (that is, less than 10 percent). This is one of three returns to scale. The other two are increasing returns to scale and constant returns to scale. Decreasing returns to scale results if long-run production changes are less than the proportional changes in all inputs used by a firm.Suppose, for example, that The Wacky Willy Company employs 1,000 workers in a 5,000 square foot factory to produce 1 million Stuffed Amigos (those cute and cuddly armadillos, tarantulas, and scorpions) each month. Decreasing returns to scale exists if the scale of operation expands to 2,000 workers in a 10,000 square foot factory (a doubling of the inputs) and production increases by less than 2 million Stuffed Amigos. The anticipated pattern for most production activities is that increasing returns to scale emerge for relatively small levels of production, which is then followed by constant returns to scale and decreasing returns to scale. Decreasing returns to scale are the flip slide of diseconomies of scale. Whereas diseconomies of scale focus on changes in average cost, decreasing returns to scale focus on production. Diseconomies of scale indicate that long-run average cost increases, which corresponds to decreasing returns to scale in terms of output. Do not confuse decreasing returns to scale with decreasing marginal returns. While these phrases sound similar, they are quite different. Decreasing returns to scale relate to the long run in which all inputs are variable. Decreasing marginal returns related to the short run in which one or more input is variable and one or more input is fixed. The existence of fixed inputs in the short run gives rise to decreasing marginal returns. In particular, decreasing marginal returns result because the capacity of the fixed input or inputs is being reached. However, in the long run, there are no fixed inputs.
Recommended Citation:DECREASING RETURNS TO SCALE, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2021. [Accessed: March 8, 2021].
Check Out These Related Terms... | | | | | |
Or For A Little Background... | | | | | | | | | | | | | | | | |
And For Further Study... | | | | | | | | | | | | |
Search Again?
Back to the WEB*pedia
|
|
|
BROWN PRAGMATOX
[What's This?]
Today, you are likely to spend a great deal of time strolling around a discount warehouse buying club hoping to buy either a half-dozen helium filled balloons or a packet of address labels large enough for addresses of both the sender and the recipient. Be on the lookout for rusty deck screws.
Your Complete Scope
This isn't me! What am I?
|
|
|
The first U.S. fire insurance company was established by Benjamin Franklin in 1752 in Philadelphia.
|
|
|
"If you don't have time to do it right, when will you have time to do it over?" -- John Wooden, Basketball coach
|
|
UNCTAD
United Nations Conference on Trade and Development
|
|
|
Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.
User Feedback
|
|
