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
Broader the range of other uses of a commodity, higher the price elasticity of its demand intended for the fall in price though less elastic for the increase in price. As price of

In this question you will consider the impact on the building industry of the earthquake. Two construction and materials indices have been provided for the analysis.  If your famil

The services of a certified psychologist cost $110 per hour, and an extended health plan covers 50 percent of that cost. Under the plan, the clients covered used 625 hours of this

factorsw determining demand

Controller of Credit The principles of credit control by the central bank were discovered and enunciated after the publication of Bagehot Lombard street in 1873. Even after 187

Demand for money   The demand for money is a more difficult concept than the demand for goods and services.  It refers to the desire to hold one's assets as money rather tha

Using Factor Incomes for Calculating National Income     A second method is to sum up all the incomes to individuals in the form of wages, rents, interests and profits t


What are the essential points to determine in monopoly? Points essential to determine in monopoly: a. The importance of monopoly, where a particular monopolist is the merely

Firm and industry supply schedules The plan or table of possible quantities that will be offered for sale at different prices by individual firms for a commodity is called su