Returns to a factor and returns to scale are two important laws of production. Returns to a factor relate to the short period production function when one factor is varied keeping the other factor fixed in order to have more output, the marginal returns of the Variable factor diminish.
What is returns to a variable factor?
Returns to a variable factor refer to the behaviour of output when quantities of one variable factor are increased keeping other factors fixed. Since the proportion between variable factor and the fixed factors change, this law is also called the law of variable proportion.
What is returns to input?
the rate of change of OUTPUT within the SHORT-RUN theory of supply, resulting from changes in the VARIABLE-FACTOR INPUT in a plant of a given (fixed) size. In the short run, some FACTOR INPUTS are variable but other inputs are fixed.
What are the causes of increasing returns to a variable factor?
There are three important reasons for the operation of increasing returns to a factor:
- Better Utilization of the Fixed Factor: In the first phase, the supply of the fixed factor (say, land) is too large, whereas variable factors are too few.
- Increased Efficiency of Variable Factor:
- Indivisibility of Fixed Factor:
What is meant by returns to a factor?
Returns to a factor refers to the behaviour of physical output owing to change in physical input of a variable factor, fixed factors remaining constant. Was this answer helpful?
What causes increasing returns to a variable factor in the?
In the first phase, the supply of the fixed factor (say, land) is too large, whereas variable factors are too few. So, the fixed factor is not fully utilised. When variable factors are increased and combined with fixed factor, then fixed factor is better utilised and output increases at an increasing rate.
When do returns to a factor diminish?
Returns to a factor relate to the short period production function when one factor is varied keeping the other factor fixed in order to have more output, the marginal returns of the Variable factor diminish.
What causes returns to a factor to be negative?
Returns to a factor or to variable proportions end up in negative returns. 3. It is a short-run phenomenon. 5. Returns to variable proportions are caused by indivisibility of certain fixed factors, specialisation of certain variable factors, or sub-optimal factor proportions.
