Search results
Results from the WOW.Com Content Network
Economies of scale is related to and can easily be confused with the theoretical economic notion of returns to scale. Where economies of scale refer to a firm's costs, returns to scale describe the relationship between inputs and outputs in a long-run (all inputs variable) production function.
In microeconomics, diseconomies of scale are the cost disadvantages that economic actors accrue due to an increase in organizational size or in output, resulting in production of goods and services at increased per-unit costs. The concept of diseconomies of scale is the opposite of economies of scale.
Economic models can be such powerful tools in understanding some economic relationships that it is easy to ignore their limitations. One tangible example where the limits of economic models allegedly collided with reality, but were nevertheless accepted as "evidence" in public policy debates, involved models to simulate the effects of NAFTA ...
For example, if there are increasing returns to scale in some range of output levels, but the firm is so big in one or more input markets that increasing its purchases of an input drives up the input's per-unit cost, then the firm could have diseconomies of scale in that range of output levels.
Such countries did benefit from economies of scale and so had large plantation agriculture with slave labor, large income and class inequalities, and limited voting rights. This difference in political power led to little spending on the establishment of institutions such as public schools and slowed down their progress.
Another example is non-numerical decision tree analysis. Qualitative models often suffer from lack of precision. At a more practical level, quantitative modelling is applied to many areas of economics and several methodologies have evolved more or less independently of each other. As a result, no overall model taxonomy is naturally available ...
For example, Rio Tinto, Vale and Xstrata, Brasil’s and London’s largest mining companies, not only ended negotiations on their buyout deal, but have strategically refused to engage in traditional long term supply contracts due to lucrative spot market opportunities.
For example, if both capital and labor inputs are doubled, output of the commodities is doubled. In other terms the production function of both commodities is " homogeneous of degree 1". The assumption of constant returns to scale CRS is useful because it exhibits a diminishing returns in a factor.