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.

LA

Related Economics IB answers

All answers ▸

In micro-economics, why is a demand curve downwards sloping?


Evaluate the advantages of perfectly competitive and monopolistic markets in the long run.


What are the non-price determinants of demand?


Explain one reason why governments impose indirect taxes.