LAWS OF DIMINISHING RETURNS
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The Law of Diminishing Returns states that as successive units of
a variable factor is applied to a given fixed factor, output will increase at
first but it will get to a point at which the addition of one more unit of the
variable factor will result in less additional units of output. In order words,
The variable Factor here can be Labour or capital and the fixed factor can be
land.
The Law of Diminishing Returns,
sometimes called the law of variable
proportions, is applicable to both the agricultural and industrial sectors
that use both the fixed and variable factors of production.
This Law can be illustrated in the
table below
Fixed Factor (Land)
|
Variable Factor (Labour Unit)
|
Total Output (kg)
|
Average Output (kg)
|
Marginal Output (kg)
|
1
|
1
|
10
|
10
|
|
1
|
2
|
30
|
15
|
20
|
1
|
3
|
60
|
20
|
30
|
1
|
4
|
120
|
30
|
60
|
1
|
5
|
100
|
20
|
20
|
1
|
6
|
90
|
15
|
10
|