LAW OF DIMINISHING RETURN
Law of Diminishing Return says that in a production process, when single factor of production increases, marginal output decreases.
There are three type of stages in it-
1.When total product curve and average product curve increase, marginal product is first increasing and then decreasing.
2. When total product curve increasing, average product and marginal product both decreases.
3. When Total product is diminishing, average product is decreasing and marginal product is negative.
For Example- Consider a dairy firm.
You throught of investing in dairy farm,having 50 cows. And decided to give them proper nutrition so that they can produce sufficient milk.
You decided to give them,sufficient amount of grass hay,and you where thinking about Exogenous daily oxytocin injection to give them so that they can produce more. You started giving them that injection twice a month and the milk quantity increased. Then again you thought of giving it 4 times a month, then you saw that cows started giving lesser milk because of excess inject.
The law of Diminishing Return says thar therr will be a point where the additional output of milk firm one additional unit of injection will be smalmer than the additional output of milk from previous increase in fertiliser.
No comments:
Post a Comment