Returns to Scale

Definition: Returns to Scale is a long existing economic concept. Diminishing returns to scale occur if at least one factor is fixed. This means that diminishing returns are typically a short run problem. It measures and reflects the change in output when all factor inputs are varied with the same percentage. They can be classified into 3 forms namely:
1. INCREASING RETURNS TO SCALE
2. DECREASING RETURNS TO SCALE
3. CONSTANT RETURNS TO SCALE

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