Question

For the seven terms listed below, explain what the term means and how it matters in European economic history. In most cases, a three-sentence explanation answer is fine.

1. Increasing returns to scale
2. Economies of scope
3. Financial leverage
4. Backward linkages
5. Redundant tariff
6. Conacre
7. Clogs to clogs in three generations

Answer 1

Increasing returns to scale.

The concept of increasing returns to scale is that if a specific percentage increase in inputs leads to a higher than that specific percentage increase in output.  As an example, if input is increased by 4 times, but output increases by 4.75 times, then the economy has been getting an increasing returns to scale.

Economies of scope

These are economic factors that make the concurrent manufacturing of distinguished products much more cost effective than manufacturing them one by one. As an example, McDonald's produces hamburgers and french fries at a lesser expense than the cost of production of each of the goods separately as hamburgers and french fries of McDonald's uses the same food storage, preparation facilities etc. at the time of production.

Financial Leverage.

It is the amount of debt utilized by an entity to buy more assets. Excess of financial leverage raises the risk of failure and hence it will become more difficult to repay debt.

Backward linkages

The concept of backward linkages was introduced by Hirschman. It is created when a project trigger investment in facilities which allows project to prosper.

Redundant tariff

It is a tariff charged which does not affect trade as certain non-tariff obstacle already exists.

Conacre

Small portions of land letting by a tenant prepared for grazing. The system that exists in different names in Europe and Asia, permits large landowners significant control over their land and its laborers as peasants or serfs.

Clogs to clogs in three generations

It is based on the concept that a family which got rid from poverty, become poor again in a span of three generations. At first, this concept was heard in UK.