Question

Differentiate between returns to scale & returns to a variable factor.

Answer 1

Basis	Returns to a variable factor	Returns to scale
Definition	Refers to changes in output when one input is varied while others are kept constant.	Refers to changes in output when all inputs are changed simultaneously and proportionately.
Time frame	Returns to a variable factor operate in the short run.	Returns to scale operate in the long run.
Input variation	In returns to a variable factor, only one input (generally labor) is varied while other inputs remain fixed.	In returns to scale, all factors of production are varied together in the same proportion.
Stages	Shows Increasing, Diminishing, and Negative Returns.	Shows Increasing, Constant, and Decreasing Returns to Scale.
Example:	An example is when more labor is applied to a fixed amount of land.	An example is when both labor and capital are doubled together.