The law of diminishing returns (law of variable proportions), Managerial Economics

THE LAW OF DIMINISHING RETURNS (LAW OF VARIABLE PROPORTIONS)

One of the most important and fundamental principles involved in economics called the law of diminishing returns or variable proportions.  We may state it thus:

The law of diminishing returns comes about because of several reasons:

1.          The ability of labour to substitute for the fixed quantity of land.

2.     The marginal physical output of labour increases for a time, as the benefits of specialization and division of labour make for greater efficiency.

3.          Later all the advantages of specialization are exhausted.

4.     The law of diminishing returns comes about because each successive unit of the variable factor has less of the fixed factor to work with.  In fact, they therefore start getting in the way of others with the fixed factor with consequent decline in output.

We can see the law leads to three stages of production, namely, stage of:

1.          Increasing returns

2.          Diminishing returns

3.          Negative returns

Posted Date: 11/27/2012 7:17:20 AM | Location : United States







Related Discussions:- The law of diminishing returns (law of variable proportions), Assignment Help, Ask Question on The law of diminishing returns (law of variable proportions), Get Answer, Expert's Help, The law of diminishing returns (law of variable proportions) Discussions

Write discussion on The law of diminishing returns (law of variable proportions)
Your posts are moderated
Related Questions
Marris constraints of growth maximisation

explian williomson model of managerial discretion

Determinants of Demand Price elasticity of demand fluctuates from commodity to commodity. Whereas the demand of some commodities is highly elastic, demand for others is highly


income generation process through investment multiplier

Q. Explain about Frequency domain? Frequency domain:   Frequency domain is a term which is used to elucidate the domain for analysis of mathematical signals or functions with

Perfect Competition   The model of perfect competition describes a market situation in which there are: i.         Many buyers and sellers to the extent that the supply of

Average Revenue (AR) This is the revenue per unit of the commodity sold.  It is obtained by dividing Total Revenue by total quantity sold.  For a firm in a perfectly competiti


Explain how a product would reach equilibrium position with the help  of -iso-quants and iso-cost curve.