Question

In that law, we see increasing returns at the start of production, production then exhibits diminishing returns until it peaks, and then will exhibit negative returns if we attempt to push beyond that.

Now, think about your work day - it could be a work day at your place of employment or a work day of school activities or a workday at home if you are a homemaker. Provide two examples of how your work day exhibits increasing returns, diminishing returns and then negative returns. Be sure to explain how all these different types of returns would happen.

Answer 1

Considering the example at the workplace, it is seen that in the initial morning hours the productivity of the employees is more and they produce more output per hour as compared to their productivity in the after noon session of the office. And if the employees are made to work overtime without bonus, then their productivity turns negative and actual output produced by the employee declines. Thus, in the morning hours there are increasing returns to scale in the production output of the employees which becomes decreasing returns to scale in afternoon session and if they are working in the evening also, then negative returns to scale are seen.

In the regular school activities also, students are active in the morning periods while become lazy and lethargic in afternoon session. Thus, there exists increasing returns to scale in morning and decreasing returns to scale in the afternoon session. If they have to stay back in the school for some extra classes, then their productivity declines further and it becomes negative.

Thus, the economic concept of returns to scale holds true in case of regular daily activities also.