The way total output changes due to change in all inputs in same proportion is known as law of

examrobotsa's picture
Q: 93 (CDS-II/2014)
The way total output changes due to change in all inputs in same proportion is known as law of

question_subject: 

Science

question_exam: 

CDS-II

stats: 

0,13,20,13,6,5,9

keywords: 

{'total output changes': [0, 0, 0, 1], 'same proportion': [0, 0, 0, 3], 'constant returns': [0, 0, 0, 1], 'returns': [0, 0, 0, 2], 'inputs': [0, 0, 0, 5], 'law': [0, 0, 0, 1]}

The law being referred to in this question is the law of returns to scale. Returns to scale refers to the relationship between the proportionate increase in inputs and the resulting increase in output. In the context of this question, it states that when all inputs are increased in the same proportion, the total output will also increase in the same proportion. This means that if the inputs are doubled, the output will also double.

Diminishing returns, on the other hand, refers to a situation where increasing the quantity of one input while keeping other inputs constant leads to a proportionate decrease in output. Increasing returns is the opposite, where increasing the quantity of one input leads to a proportionate increase in output. Constant returns, as the term suggests, means that increasing the inputs in the same proportion will result in a proportional increase in output.

Therefore, option 1, Returns to scale, is the correct answer because it describes the concept of the total output changing due to a change in all inputs in the same proportion.