Diminishing returns refers to a situation where a firm is trying to expand by using more of its variable factors, but finds that the extra output they get each time they add one gets progressively less and less. This usually arises because their capacity is limited in the short-run and the combination of the fixed and variable factors becomes less than optimal. Diminishing returns is the main reason why the short-run aggregate supply curve is upward sloping. Typically refers to an increase in a country's output of goods and services. Economies of scale - A reduction in long run unit costs which arise from an increase in production.
Economies of scale occur when larger firms are able to lower their unit costs.
This may happen for a variety of reasons. A larger firm may be able to buy in bulk, it may be able to organise production more efficiently, it may be able to raise capital cheaper and more efficiently. All of these represent economies of scale. European Investment Bank - The European Investment Bank is the largest financial institution in the world. It gives loans for regional development particularly in the less developed areas of Europe.