Returns to scale
Returns to scale describes what happens to a firm's total output when it increases all of its inputs by the same proportion. Output can rise faster, slower, or at exactly the same rate as the inputs.
Real World
When Tesla doubled the size of its Gigafactory Nevada, output of battery cells more than doubled due to greater automation and specialisation — a clear example of increasing returns to scale.
Exam Focus
Link returns to scale explicitly to the long run; failing to do so is the most common reason students drop marks on this topic.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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