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They will continue it to do and after change of conditions. In particular, when demandWill increase, there will be a set of possible methods of increase in output Besides augmentation of the equipment of that type, which they till now Used. If they cannot obtain the credit to lower the internal Norm of return to the former level, some of these methods will appear more Favourable, than used earlier.
There will be two basic categories of the changes which have become now favourable:
The businessman can or use available equipment more Intensively (that is with the big expenses of work) - directing on it a part
Means which differently would be invested in replacement of the old equipment
New, but the same type or to replace worn out machine tools with a considerable quantity
Cheaper machine tools. Most likely, both methods, though will be involved The first, apparently, more important.
Obvious receptions of snowballing of volume of production at a rise in price Are that: to work overtime, enter two or three changes, to supply
The additional help working on available machine tools for their clearing from
Auxiliary operations etc. It, naturally, will raise costs on Labour counting on a unit of production which did not allow To use such methods to a rise in price. But if the circulation to any of These methods will increase incremental costs by a labour counting on Unit of production, say, on 4 % admitted by us, it will be simple for meaning that
Very small rise in price for 5 %, on 20, if the objection that increase will follow Costs which under our assumptions should be caused the overtime
Work, 25 %, say, will not cause the such
Effect also that the rise in price, it is insignificant a little or similar receptions, for this purpose is required
At a rise in price for 5 % it will be still given by an additional profit in 1 % that at
Rate of turnover in 6 times all the same will supply internal norm of return from this
Forms of investments in 12 % - in comparison with 6,5 % from the equipment with
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