How would you explain, in your own words, the concept of "Decreasing Returns to Scale"?

This is a phenomenon that occurs when input (labour, raw materials or capital) is added to a production process and yields a less than proportional increase in outputAs an example, we could look at a company producing bottles. If the owner increases the input of labour (hires more workers) or materials (buys more plastic to produce bottles) by 50% ; but the production of bottles only increases by 20%, we can talk about the Decreasing Returns to Scale.

Answered by Laura A. Economics tutor

1609 Views

See similar Economics IB tutors

Related Economics IB answers

All answers ▸

What factors influence the shift of a demand curve?


Should the government intervene in cases of market failure?


Evaluate the effectiveness of Fiscal Policy in promoting economic activity during a recession.


Why do firms in perfect competition earn normal profit in the long run


We're here to help

contact us iconContact usWhatsapp logoMessage us on Whatsapptelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences