distinguish between the returns to scale and returns to variable proportions
Answers
Explanation:
Returns to a variable factor examine the effects on output when only one factor is increased while assuming other factors to be constant. Returns to scale examine the effects on output when all the factors are increased simultaneously in the same proportion.
Explanation:
ANSWER
Law of variable proportions is a short period concept when output can be increased only by increasing the application of the variable factor. Fixed factor (indicating scale of output) remains constant.
Returns to scale, on the other hand, is a long period concept when output can be increased by increasing the scale of output. Increasing returns, constant returns and diminishing returns tend to operate when the scale of output is expanded, even when all the factors are variable factors.
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