Decreasing returns to scale

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Updated: Aug 20, 2021

A property of a function of one or several variables such that when all variables change by the same factor the value of the function changes less than proportionally. For example, a production function with capital and labour as two factors has decreasing returns to scale if the output with twice as much capital and labour is less than double what it was with the original inout levels.

Decreasing returns to scale

Reference: Oxford Press Dictonary of Economics, 5th edt.


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James is a lead content editor for Invezz. He's an avid trader and golfer, who spends an inordinate amount of time watching Leicester City and the… read more.