Explain the reasons behind ‘diminishing returns to factors’.
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Fixed Factors of Production: The law of diminishing returns applies because certain factors of production are kept fixed. ... If certain factor becomes fixed, the adjustment of factor of production will be disturbed and the production will not increase at increasing rates and thus law of diminishing returns will apply.
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Explanation:
The causes for the operation of law of diminishing returns are discussed below:
Fixed Factors of Production: The law of diminishing returns applies because certain factors of production are kept fixed. ...
Scarce Factors: ADVERTISEMENTS: ...
Lack of Perfect Substitutes: ...
Optimum Production:
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