Question

The operation of law of diminishing return is due to scarcity of factor of production. Discuss.​

Answer 1

Answer:

There is another reason due to which the law of diminishing returns does not apply i.e., lack of perfect substitutes of factors of production. It means that one factor of production cannot be substituted for another factor. Substitute for every factor of production is not always available.

Answer 2

Answer:

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.

Neoclassical economists postulate that each “unit” of labor is exactly the same, and diminishing returns are caused by a disruption of the entire production process as extra units of labor are added to a set amount of capital.