Question

What are the causes of return to diminishing returns to a factor?​

Answer 1

Answer:

Law Of Diminishing Returns: Assumptions, Explanation, Causes, Importance and Limitations!

Assumptions:

The main assumptions of the law are:

1. No Change in Technology:

First of all, the law is based on the assumption that there is no change in the techniques of production. If the techniques of production undergo a change, in that case the efficiency of production would increase. Therefore, this law applies only if there is no change in the method of technology.

2. Short Period:

The law is applicable in the short run as supply of one or the other factor cannot be increased within the short span of time. Thus, they are considered fixed.

3. Homogeneous Units:

All units of variable factors of production are assumed to be homogeneous.

4. Measurement of Product.

The output is measured in physical units like tones, kilograms etc.

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Answer 2

Causes for diminishing returns to a factor :

Diminishing returns to a factor or law of diminishing returns can be explained in terms of following factors.

Fixidity of factors :

It is the principal cause behind diminishing returns to a factor. As more and more variable factors are combined with fixed factors, latter get excessively utilized.

Imperfect factor substitution :

Factors of production are imperfect substitute of each other . More labour continue used in place of money is its example.

Poor coordination between factors.:

Increasing application of variable factors eventually distrub the ideal factor ratio.