The Meaning of Constant Returns to Scale

Constant returns to scale is a potential  of a production function. A production function exhibits constant returns to scale if changing all inputs by a positive proportional factor has the effect of increasing outputs by that factor. This may be true only over some range, in which case one might say that the production function has constant returns over that range.

One can check to see if a production function exhibits constant returns to scale via the following simple procedure:  double all of the inputs to production and see if the amount of output generated exactly doubles as well.

 If so, the production function has constant returns to scale, at least over that range of output!

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Econterms. "The Meaning of Constant Returns to Scale." ThoughtCo, Jun. 1, 2016, thoughtco.com/constant-returns-to-scale-definition-1146059. Econterms. (2016, June 1). The Meaning of Constant Returns to Scale. Retrieved from https://www.thoughtco.com/constant-returns-to-scale-definition-1146059 Econterms. "The Meaning of Constant Returns to Scale." ThoughtCo. https://www.thoughtco.com/constant-returns-to-scale-definition-1146059 (accessed May 23, 2018).