Constant returns to Scale

Thus the constant returns to scale means that if all factor-inputs are varied at a certain percentage rate, output will change by the same rate.

Or, when the increase in output is proportional to the increase in the quantities of all factor-input; it is termed as constant returns to scale.

The constant returns to scale sometimes referred to by economists in managerial language, a production curve showing constant returns to scale is often called” Linear and homogeneous”. The Cobb-Douglas production function evolved by American economists Paul Douglas and C. W. Cobb is a linear and homogeneous function. Following Figure illustrates content returns to scale.

OR = RP = PG

Or        OR1 = R1P1 = P1G1

OR2 = R2P2 = P2G2

      Scale of Production       Total Output

     (Machine + Labor)                (Units)

1Machine + 2 Labor                     100

2Machine + 4 Labor                     200

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