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Increasing Returns to Scale

  • A. R. G. Heesterman
Chapter
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Part of the International Studies in Economics and Econometrics book series (ISEE, volume 3)

Abstract

Until now, we have always assumed linear production functions. That is a rather restrictive assumption. Textbooks of economic analysis are full of continuous and differentiable production functions, which are obviously non-linear. Some of this may be explained away as being approximated as a piecewise broken linear function. In particular, one suspects that the much discussed Law of Diminishing Returns in fact refers to alternative processes. At any level of demand, the collection of operated processes will consist of the most efficient ones that are available at a particular point in time. These relatively efficient processes may have limited capacities and an increase in demand may have to be sustained by the use of less efficient processes, for example, by having done the work in other places, involving transport costs.

Keywords

Cash Flow Capital Good Full Capacity Economic Planning Price Structure 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© D. Reidel Publishing Company, Dordrecht, Holland 1971

Authors and Affiliations

  • A. R. G. Heesterman

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