Constant Returns to Scale

Constant Returns to Scale occur when increasing all inputs in a production process by a certain factor results in an exactly proportional increase in output. For example, if a factory doubles its labor, machinery, and materials, and its output also doubles, it exhibits constant returns to scale. This means the efficiency of production remains stable as the scale of operation expands. It's an important concept in economics because it helps determine how production costs change with size, influencing decisions on expansion and resource allocation.