Consider the following statements:
1. When a proportional increase in all inputs results in an increase in output by the same proportion, the production function is said to display Constant returns to scale (CRS).
2. When a proportional increase in all inputs results in an increase in output by a larger proportion, the production function is said to display Increasing Returns to Scale (IRS).
Which of the statements given above is/are correct?
1
1 only
2
2 only
3
Both 1 and 2
4
Neither 1 nor 2