Question

STATE THE LAW OF DIMINISHING RETURNS FOR LABOUR AND WHERE IT STARTS USING THREE STAGES OF PRODUCTION

Answer 1

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⏺️Law of dimnishing marginal utility states that as more and more units of a commodity are consumed ,marginal utility derived from every additional unit must decline .It happen in respect of all good and services .



▶️When variable factor is combined with the fixed factor ,marginal product of the variable factor may initially rise ,but eventually a situation must come when marginal product of the variable factor start declining . Marginal product may ultimately becomes zero or even negative .


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Answer 2

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The law of diminishing returns operates in the short run when we can’t change all the factors of production. Further, it studies the change in change in output by varying the quantity of one input. Technically, the law states that as we increase the quantity of one input which is combined with other fixed inputs, the marginal physical productivity of the variable input must eventually decline.

In simpler words, the total productivity, for a given state of technology, is bound to increase with an increase in the quantity of a variable input. However, as the quantity of the inputs keeps on increasing, the marginal product rises to a maximum, then starts to decline and eventually becomes negative. This is because the crowding of inputs eventually leads to a negative impact on the output.



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