Question

In the classical theory of development,

what postpones the onset of diminishing

returns to capital?​

Answer 1

Answer:

• The classical growth theory argues that economic growth will decrease or end because of an increasing population and limited resources. Classical growth theory economists believed that temporary increases in real GDP per person would cause a population explosion that would consequently decrease real GDP.

• The classical theory has the following characteristics:

1. It lays emphasis on detecting errors and correcting them once they have been committed.
2. It is more concerned with the amount of output than human beings.
3. The human beings are considered to be relatively homogeneous and unmodifiable.

• In economics, diminishing returns is the decrease in the marginal (incremental) output of a production process as the amount of a single factor of production is incrementally increased, while the amounts of all other factors of production stay constant.
• The law of diminishing returns states that in all productive processes, adding more of one factor of production, while holding all others constant ("ceteris paribus"), will at some point yield lower incremental per-unit returns.[1] The law of diminishing returns does not imply that adding more of a factor will decrease the total production, a condition known as negative returns, though in fact, this is common.