Grade 11 Economics: Economies and Diseconomies of Scale

Vocabulary terms and definitions based on the Grade 11 Economics lecture regarding the Chain of Production and returns to scale.

Increasing Returns to Scale

A condition where a firm doubles all its inputs and results in more than doubling its output of goods or services.

Decreasing Returns to Scale

Also known as diminishing returns to scale, this occurs when increasing the factors of production (inputs) produces a lesser amount of output than the doubled input.

Constant Returns to Scale

A situation where doubling the factors of production (inputs) results in exactly doubling the output.

Inputs

The factors of production used by a firm, which in the case study included labour, the number of machines, and the number of factories.

Average Cost

The cost of production per unit, calculated by dividing the total cost of all inputs by the total product.

ACE Company

A firm that experienced increasing returns to scale by doubling its inputs and increasing its total product from $10,000$ to $25,000$ units.

BOOM Company

A firm that experienced decreasing returns to scale because it doubled its inputs but its output moved from $12,000$ to only $20,000$ units.

CRIKEY Chocolate Company

A firm that demonstrated constant returns to scale by doubling its inputs and exactly doubling its output from $9,000$ to $18,000$ units.

Kina (K)

The currency unit used to measure the total cost of inputs and calculate average cost in the provided case study.

Total Product

The total amount of output produced by a firm, such as the chocolate boxes manufactured by ACE, BOOM, and CRIKEY.