Bcom 1st Year Meaning to Scale notes
(Meaning to Scale)
The scale can be defined as… “The times that all ratios are repeated, that is, the times the fixed and variable means are increased then it establishes the scale of the firm.” ..- In simple terms, an increase in scale means increasing all the instruments in the same proportion, i.e. all means are increased by keeping the instrument ratios constant. This of scale. The idea relates to the long term because it increases the size of the firm by changing the static means.
Idea of scale consideration
(Meaning of Returns to Scale)
The idea of the consideration of the scale studies how the production will change if all the ingredients are changed proportionally, so that there is no change in the proportions of the means.
Under the analysis of the returns of scale, the mutual ratios of the means or the products are not changed but all the means are increased in the same ratio. When the quantity of instruments is increased in the same proportion, the following stages of quantity or yield of production are-
1. The state of increasing returns of scale,
2. The steady state of scale,
3. The state of decreasing returns of scale.
1. The state of rising returns of scale
(Stage of Increasing Returns to Scale)
“When all the means are increased in the same proportion and thus the scale of production increases and as a result if the output is increased in greater proportion then it is said that there is an increasing cost of production in the production process.” . ” For example, if all the instruments are increased by 10% and the production increases by 14%, then such a condition will be called a rising yield of scale. In short, at this stage the output increases in greater proportion than the increase of the means. Prof. Chamberlin has given two reasons for the rising returns of scale.
(i) As the scale increases, more specialization or division of labor can be done among the workers which increases the productivity of labor.
(ii) Under the increased scale of production, advanced technology and advanced machines can be used, which increases the production very fast. Figure 11 shows the increasing returns of scale. The diagram consists of IP2, IPO, endpoint curves which indicate output P3 and IP byproduct curves equal to 50, 100, 150, 200 units respectively. These product lines indicate a corresponding increase in production (an increase equal to 50 units). These lines divide the scale line OE into pieces (eg AB, BC, CD). Each piece of scale OE denotes a certain amount of both means X and Y. The length of each piece in the diagram is reduced, ie CD <BC KARI. This means that using two quantities of X and Y respectively of the two means gives an equal increase in output. Such a condition is called a state of increasing returns to scale.
2. The state of steady returns of scale
(Stage of Constant Returns to Scale)
When all the means are increased in the same proportion and thus the scale of production increases and as a result if the output also increases in the same proportion then it is said that the steady returns of scale are applied in the production process Huh. In other words, to achieve a uniform increase in output under the constant consideration of the scale, a gradual increase in the quantity of instruments is required. Figure 12 shows the steady returns of the scale. The product lines in the diagram divide the scale line OE into AB, BC and CD pieces. Each piece denotes a certain amount of X and Y. The length of each piece in the drawing is equal
This means that there is a uniform increase in production by using equal quantities of two means x and y respectively. Such a condition is called the steady state of scale.
3. Decreasing state of scale
(Stage of Decreasing Return to Scale)
When all the means are increased in the same ratio and thus the scale of Utta increases and consequently if the output is reduced in proportion then it is said that the decreasing returns of the production process mana are applied. Ranarth – if all the means by 10%. And production increases by less than 10%. तोp, such a situation will be called the decreasing return of the scale. In other words, a decreasing return of the scale requires a gradual increase in the volume of the instruments to achieve a uniform output of 200 days. In diagram-13 the product lines IP, IP), XXXX X IP and IP scale line OE divide AB, BC means X and CD pieces. Scale Diagram-13 Each piece of OE denotes a fixed quantity of both means X and Y. In this, the length of each piece increases, ie CD> BC>
Varying Returns to Scale – From the above considerations one should not understand that always different production functions express different types of scale. Often in a single production function. All three stages of the scale are incremental, constant or decreasing returns. The producer knows that when the scale of production of 500 is increased then in labor. More specialization and use of more advanced and 50 specific types of machines and technology. Production is increased, but the situation is not always the same. After a period of time steady returns are achieved. In this case the output increases in the same ratio / means X → the ratio in which the quantities of the instruments are increased. If even after that the scale of production is increased, it will yield decreasing returns. The reason for this is management, The difficulties related to coordination and control have increased. Gradually these difficulties increase so much that all the benefits of division and specialization of labor are eliminated. Figure 14 shows these three states.।