Production

Returns to Scale, Productivity and Production

K = Capital L = Labor

I:Increasing

Returns

II:Diminishing

Returns

III:Decreasing

Returns

Each increase in an input leads to proportionately more increase in output

Each increase in an input leads to proportionately less increase in output

Each increase in an input leads to a decline in output

60 cents

50 cents(Most Productive)53 cents

PRODUCTION

Businesses produce and sell goods so they can make profits

Profit = Π

Π = Revenues - Costs

PRICE