# Write Short Note on Law of Diminishing Returns

## 13 dec Write Short Note on Law of Diminishing Returns

A company may hire an additional worker to meet demand, but it may not cover the full performance that the employee is capable of. For example, an employee may be able to produce 10 units, but only 5 are needed. As a result, the employee produces only 5, resulting in lower yields. We can see it in local stores that see a low frequency. In short, the law of diminishing returns is a perfect phenomenon for profit maximization. If this second-order condition is not proven, it means that the person minimizes returns instead of maximizing them. Yields decline in the short term, while one factor remains firm (e.g., capital). For example, suppose there is a producer who is able to double his total input, but receives only a 60% increase in his total production; This is an example of declining scale income. Now, if the same producer doubles its total output, then it has achieved constant economies of scale, where the increase in output is proportional to the increase in production input. However, economies of scale occur when the percentage increase in output is greater than the percentage increase in inputs (so that output triples by doubling inputs).

There are many reasons for the decline in marginal yields. Examples: There is an inverse relationship between input yields and production costs, although other characteristics, such as market conditions for inputs, can also influence production costs. Suppose a kilogram of seed costs a dollar and that price does not change. For the sake of simplicity, let`s assume that there are no fixed costs. One kilogram of seed is equivalent to one tonne of harvest, so the first ton of harvest costs one dollar. That is, for the first tonne of production, the marginal cost, as well as the average cost of production, is \$1 per tonne. If there are no other changes, if the second kilogram of seed applied to the land produces only half the production of the first (with diminishing yields), the marginal cost would be \$1 per half ton of production or \$2 per tonne, and the average cost would be \$2 per 3/2 ton of production or \$4/3 per ton of production. If the third kilogram of seed produces only a quarter tonne, the marginal cost is \$1 per quarter tonne or \$4 per tonne, and the average cost is \$3 per 7/4 ton or \$12/7 per ton of production. The decline in marginal yields therefore implies an increase in marginal costs and average costs. The law of diminishing returns states that in all production processes, adding one additional factor of production while keeping all other factors constant (“ceteris paribus”) will ultimately lead to lower differential returns per unit.

[1] The law of diminishing returns does not imply that adding a factor reduces aggregate output, a condition known as negative yield, when in fact this is common. The law of diminishing returns is a useful concept in production theory. The law can be divided into rising yields, falling yields and negative returns. The manufacturing industry, especially agriculture, finds the application of this law immense. Manufacturers are wondering where to work on the marginal product graph, as the first step describes underutilized capacity and the third step is about overutilized inputs. Therefore, achieving optimal capacity is the raison d`être of this legislation. In this example, the measure can be service levels, that is, the number of calls an agent receives during a specified time period. If you add another agent, the level of service can improve because agents are not overwhelmed and do not miss calls. At some point, however, performance will fall below its original level and the last person added to staff will become the decreasing point of return.

Early economists, overlooking the possibility of scientific and technological advances that would improve the means of production, used the law of diminishing returns to predict that as the world`s population grew, per capita output would decline to the point where levels of misery would prevent the population from continuing to grow. In stagnant economies, where production techniques have not changed over long periods of time, this effect is clearly observed. In advanced economies, on the other hand, technological progress has more than offset this factor and raised living standards despite population growth. Diminishing returns occur for a number of reasons, including:Fixed costsLess productive limited demandLimited demandNegative effectsShort-term effects Describe whether the law of diminishing returns applies. If so, how? The law of diminishing marginal returns can only occur in the short run. Indeed, all factors are variable in the long term. For example, an extra worker in the café can create a chaotic environment. However, employees can learn to work together more effectively and thus achieve better returns in the long run. An important aspect of declining marginal yields is that production does not necessarily begin to decline. Instead, production is not increasing as much as it used to.

In other words, the employment of another worker does not increase output as much as the employment of the previous worker. Thus, adding another employee makes the process less efficient. The concept of diminishing returns goes back to the concerns of early economists such as Johann Heinrich von Thünen, Jacques Turgot, Adam Smith,[4] James Steuart, Thomas Robert Malthus and David Ricardo. However, classical economists such as Malthus and Ricardo attributed the gradual decline in production to declining input quality. Neoclassical economists assume that every “unit” of labor is identical. The decline in yields is due to the interruption of the entire production process, as additional units of labor are added to a fixed amount of capital. The law of diminishing yields remains an important aspect of agriculture. The law of diminishing returns is a basic principle of economics. [1] It plays a central role in the theory of production. [3] According to the law of diminishing marginal returns, taking into account an additional factor of production leads to low growth outcomes.

Once an ideal volume level is reached, adding larger quantities of a factor of production only results in a reduction in additional yields per unit. The decline in marginal returns is an effect of short-run increases in inputs while maintaining at least one production variable constant, such as labour or capital. Economies of scale, on the other hand, are a long-run effect of increased inputs in all production variables. This phenomenon is called economies of scale. At any given time, the inclusion of an additional factor of production results in comparatively lower overall output growth. Therefore, this law is only relevant in a short period of time. The total product, that is, the amount of Q, does not decrease until the 20th worker is employed. From there, the marginal product enters the phase of negative returns. The law of diminishing marginal returns does not imply that the additional unit reduces total output, but it is usually the result. Diminishing returns are also called the law of diminishing returns. The law of decreasing marginal productivity states the law of diminishing yields. The law of diminishing returns occurs when the marginal output of the production process decreases as a result of an increase in the quantity of a single factor of production, while the quantities of other production parameters remain constant.

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