Increasing returns to scale

Increasing return to scale

In today’s production scenario, where increasing output is one of the main concern we can increase production by changing capital and labour, when we increase the quantity of inputs (factors of production) the total quantity produced increases and more than the increase in inputs this phenomenon is called increasing returns to scale.

For example: In manufacturing of ceiling and table fans we require huge capital and labour so if we increase the labour and capital, we can buy raw materials and hire more labour so the quantity of production will increase more than the increase input and the producer can achieve the max production limit.