Explain in brief the difference between returns to scale and returns to expenditure outlay.
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Explain in brief the difference between returns to scale and returns to expenditure outlay.
Explain in brief the difference between returns to scale and returns to expenditure outlay.
In the case of returns to scale, changes are made in all sources by equal proportion or percentage, not by different proportions or percentages. As such, changes are not made in land area by 20%, capital by 10% and workers by 50%. When the means of production are converted according to the expenses incurred on them in equal or varying proportion, then it is known as the Return of Outlay/Expenditure.