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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.
A common and specific example is the supply-and-demand graph shown at right. This graph shows supply and demand as opposing curves, and the intersection between those curves determines the equilibrium price. An alteration of either supply or demand is shown by displacing the curve to either the left (a decrease in quantity demanded or supplied ...
A macroeconomic model is an analytical tool designed to describe the operation of the problems of economy of a country or a region. These models are usually designed to examine the comparative statics and dynamics of aggregate quantities such as the total amount of goods and services produced, total income earned, the level of employment of productive resources, and the level of prices.
Large-scale macroeconometric model consists of systems of dynamic equations of the economy with the estimation of parameters using time-series data on a quarterly to yearly basis. Macroeconometric models have a supply and a demand side for estimation of these parameters. Kydland and Prescott call it the system of equations approach. [1]
An economic model is a theoretical construct representing economic processes by a set of variables and a set of logical and/or quantitative relationships between them. The economic model is a simplified, often mathematical, framework designed to illustrate complex processes.
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.
The uptick in activity was largely driven by the services sector. The services component of S&P's report showed the index registered 57 this month, up from 55 in October and the highest level in ...
Economies of scale refers to the cost advantage arise from increasing amount of production. Mathematically, it is a situation in which the firm can double its output for less than doubling the cost, which brings cost advantages. Usually, economies of scale can be represented in connection with a cost-production elasticity, Ec. [3]