Returns to Scale

Discipline: Economics

The long-term relationship between outputs and the amount of inputs required to generate them.

If inputs are increased by half, economies of scale occur where a higher proportionate increase in production is achieved. Diseconomies of scale occur where output is increased by less than half.

Classical economists were preoccupied with the diminishing returns to scale of land, whereas post-Marshallian studies examined increasing returns to scale.

Also see: equilibrium theory

Source:
A Marshall, Principles of Economics (London, 1890);
P Sraffa, 'The Laws of Returns under Competitive Conditions', Economic Journal, vol. XXXVI (December, 1926), 535-50

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