INCREASING RETURNS
According to Wikipedia, increasing returns refers to changes in output resulting from a proportional change in all inputs (where all inputs increase by a constant factor). When output grows by a same proportionate change then it is called a constant returns to scale or abbreviated CSS. When output grows by less than that proportionate change, then there is a decreasing returns to scale. When output grows more than that proportionate change then there is increasing Reuters to scale.
An example of increasing returns in the real world would be when you make a product that is innovative and the product becomes really valuable as sales increase. An example of this would be the Apple iPod, a popular MP3 device. This product has competitors such as Microsoft's Zune and others. However, through its competitve advantage and through its fancy features it is always the product to have every time they roll out a new version of it.
If we have increasing returns, then we will be able to make more profits while we increase our product line. This is a really good thing because sometimes in the industry, if you make more you will sometimes lose money.
If I wanted to sell guitars in a company and I had increasing returns. I can make more brands and style of guitars. Fender Guitar Company is a very prestigious and popular guitar company. They make lots of brands and styles of guitars. The Fender Stratocaster is an iconic guitar that's style is mimicked by many guitar companies. Jimi Hendrix is a posterboy for this guitar. His white Fender Stratocaster was the image of rock and roll during his time. They also have the Fender Telecaster, which has more of a bluesy sound. They also have their own line of lower cost guitars called Squires. Their guitars look like the Stratocasters and Telecasters however they do not have the Fender logo on it.
If we have increasing returns, then we will be able to make more profits while we increase our product line. This is a really good thing because sometimes in the industry, if you make more you will sometimes lose money.
If I wanted to sell guitars in a company and I had increasing returns. I can make more brands and style of guitars. Fender Guitar Company is a very prestigious and popular guitar company. They make lots of brands and styles of guitars. The Fender Stratocaster is an iconic guitar that's style is mimicked by many guitar companies. Jimi Hendrix is a posterboy for this guitar. His white Fender Stratocaster was the image of rock and roll during his time. They also have the Fender Telecaster, which has more of a bluesy sound. They also have their own line of lower cost guitars called Squires. Their guitars look like the Stratocasters and Telecasters however they do not have the Fender logo on it.
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