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{{Economics_Lectures}}

{{Economics_Lectures}}

This week's lecture is shorter an the homework assignment is easier than usual, in honor of the Thanksgiving break.  There will be no class next week.

This week's lecture is shorter and the homework assignment is easier than usual, in honor of the Thanksgiving break.  There will be no class next week (Thanksgiving Day).

We are now two weeks past the midterm, but do not forget that the midterm exam is part of this course, and please refer to the questions you answered incorrectly -- and perhaps a few that you answered correctly by guessing.  Make sure that you fully understand as many of the concepts as possible.  Be prepared to apply those same principles correctly to new problems.  The lighter lecture and assignment this week give you the opportunity to "catch up" on aspects of this course you haven't yet fully learned.

We are now two weeks past the midterm, but do not forget that the midterm exam is part of this course, and please refer to the questions you answered incorrectly -- and perhaps a few that you answered correctly by guessing.  Make sure that you fully understand as many of the concepts as possible.  Be prepared to apply those same principles correctly to new problems.  The lighter lecture and assignment this week give you the opportunity to "catch up" on aspects of this course you haven't yet fully learned.

Next let's review “returns to scale.”  Imagine using a scale of one foot in measuring the dimensions of a room.  Then change to a scale of inches.  All dimensions increase by a factor of 12, because there are 12 inches to a foot.  That is what “scale” means: it affects everything.  In economics, changing the scale means changing all inputs by the same proportion.  Increasing the scale means increasing all inputs.  The “returns to scale” are then what happens to the output of a company when all inputs are increased.  Is bigger better for the business?

Next let's review “returns to scale.”  Imagine using a scale of one foot in measuring the dimensions of a room.  Then change to a scale of inches.  All dimensions increase by a factor of 12, because there are 12 inches to a foot.  That is what “scale” means: it affects everything.  In economics, changing the scale means changing all inputs by the same proportion.  Increasing the scale means increasing all inputs.  The “returns to scale” are then what happens to the output of a company when all inputs are increased.  Is bigger better for the business?

The phrase that something is "scalable" means its proportions increase in a similar way in all respects, like "similar triangles" in geometry.  Some things are "scalable", while others are not.  A software database program that works the same for 100 entries as it does for 1 million entries is "scalable"; a program that needs to be reworked and reprogrammed as the database grows larger is not scalable.  One the terrific features of "wiki" software used by Conservapedia is that it is scalable: almost no adjustments were needed as the number of its entries increase from 1 to 1000 to over 30,000.

The phrase that something is "scalable" means its proportions increase in a similar way in all respects, like "similar triangles" in geometry.  Some things are "scalable", while others are not.  A software database program that works the same for 100 entries as it does for 1 million entries is "scalable"; a program that needs to be reworked and reprogrammed as the database grows larger is not scalable.  One the terrific features of "wiki" software used by Conservapedia is that it is scalable: almost no adjustments were needed as the number of its entries increase from 1 to 1000 to over 30,000 now, or even to a million entries in the future.

“Increasing returns to scale” means that when you increase all the inputs, then your company’s output increases by an even greater proportion.  For example, if you double your inputs then perhaps your output triples.  That would be extremely profitable for your business.  Your costs only double, but your revenue triples.  Your profits skyrocket.  It is a formula for success.

“Increasing returns to scale” means that when you increase all the inputs, then your company’s output increases by an even greater proportion.  For example, if you double your inputs then perhaps your output triples.  That would be extremely profitable for your business.  Your costs only double, but your revenue triples.  Your profits skyrocket.  It is a formula for success.