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indivisibility


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1 In a productive process, the existence of a minimum scale at which any technique can operate. This applies to all productive techniques. In some cases the minimum scale is so small that it has no economic effects, but in other cases it is sufficiently large to make the technique unavailable to small firms. Indivisibilities in techniques are a major source of both economies of scale and economies of scope.

2 A limit on the possible subdivision of a commodity or security. For example, US Treasury Bills are sold in increments of $1 000. Indivisibilities limit the extent to which a consumption plan or a portfolio can exactly match the optimal choice. The market offers solutions to some indivisibilities: indirect investment is a method of overcoming the indivisibility of securities.

Subjects: Law — Economics.


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