Returns to scale definition investopedia forex

6r returns to scale definition investopedia forex when all the productive factors are increased or decreased- simultaneously and in the same ratio. In other words, in returns to scale, we analyse the effect of doubling, trebling, returns to scale definition investopedia forex, and so on of all the inputs of productive resources on the output of the product. But actually this is not so.

Similarly, when we increase the scale, i. In other words, there are three distinct phases of, or stages in, the behavior of the marginal product. A’ stands for Acres of land. In the above table, we see that at the outset when we employ one worker on three acres, of land, the total product is 2 quintals.

5 quintals to 9 quintals—the increase this time being 4 quintals as against 3 in the previous case. In other words, the returns to scale have been increasing. In the above table at Serial No. 9 the marginal product or return falls to only two quintals. Now we may try to explain why we get the above-mentioned three phases or stages, i. The chief reason of this kind of behaviour is that when, in the beginning, the scale of production is increased, increased division of labour becomes possible and is adopted and, as a result thereof, output increases rather rapidly. In the above table, when there is only one worker working on three acres of land, there is no scope for division of labour.

When there are two workers instead and six acres of land, i. Investors may be lead to believe that the profits are coming from product economic development definition investopedia forex, stock growth, or other means. The scheme is named after Charles Ponzi, who became notorious for using the technique in the 1920s. Typically, Ponzi schemes require an initial investment and promise well-above-average returns. Initially, the operator will pay high returns to attract investors and entice current investors to invest more money. When other investors begin to participate, a cascade effect begins. The operator will simply send statements showing how much they have earned, which maintains the deception that the scheme is an investment with high returns.

Investors within a Ponzi scheme may even face difficulties when trying to get their money out of the investment. Operators also try to minimize withdrawals by offering new plans to investors where money cannot be withdrawn for a certain period of time in exchange for higher returns. Hedge funds can easily degenerate into a Ponzi-type scheme if they unexpectedly lose money or fail to legitimately earn the returns expected. If the operators fabricate false returns or produce fraudulent audit reports instead of admitting their failure to meet expectations, the operation is then considered a Ponzi scheme. A wide variety of investment vehicles or strategies, typically legitimate, have become the basis of Ponzi schemes.