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Returns to Factor and Returns to Scale refer to the rise in the total product because of increasing just one factor while holding the other factors constant and change in the factor inputs simultaneously in the same proportion in the long run respectively. What is Returns to Factor? Returns to a factor refer to the…

What is the Law of Returns to Scale? Returns to scale refer to the change in output that results from a change in the factor inputs simultaneously in the same proportion in the long run. Simply put, when a firm changes the quantity of all inputs in the long run, it changes the scale of…

Consumers and producers both play a crucial role in the efficient operation of an economy. A producer uses a variety of inputs to create commodities and services. Production is an essential economic activity since it transforms the product into the form consumers require, increasing its utility. It helps transform the raw materials into some desirable…

What is the Law of Variable Proportions? Imagine that a farmer is cultivating wheat only by using more and more labour in a circumstance where land is a fixed factor and labour is a variable factor. Here’s a crucial query: Will the amount of wheat produced by each additional unit of labour used in the…

Consumers and producers both play a crucial role in the efficient operation of an economy. A producer uses a variety of inputs to create commodities and services. Production is an essential economic activity since it transforms the product into the form consumers require, increasing its utility. It helps transform the raw materials into some desirable…

What is Production Function? Production Function is the relationship between physical inputs (land, labour, capital, etc.) and physical outputs (quantity produced). It is a technical relationship (not an economic relationship) that studies material inputs on one hand and material outputs on the other hand. Material inputs include variable and fixed factors of production. In a standard…