{"id":3769,"date":"2020-03-03T05:21:08","date_gmt":"2020-03-03T05:21:08","guid":{"rendered":"https:\/\/commerceiets.com\/?p=3769"},"modified":"2020-03-03T05:21:08","modified_gmt":"2020-03-03T05:21:08","slug":"law-of-diminishing-returns","status":"publish","type":"post","link":"https:\/\/commerceiets.com\/law-of-diminishing-returns\/","title":{"rendered":"LAW OF DIMINISHING RETURNS"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_69_1 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#LAW_OF_DIMINISHING_RETURNS\" title=\"LAW\nOF DIMINISHING RETURNS\">LAW\nOF DIMINISHING RETURNS<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#ASSUMPTIONS_OF_LAW_OF_DIMINISHING_RETURNS\" title=\"ASSUMPTIONS\nOF LAW OF DIMINISHING RETURNS\">ASSUMPTIONS\nOF LAW OF DIMINISHING RETURNS<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#EXPLANATION_OF_THE_LAW_OF_DIMINISHING_RETURNS\" title=\"EXPLANATION OF THE LAW OF DIMINISHING RETURNS\">EXPLANATION OF THE LAW OF DIMINISHING RETURNS<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#CAUSES_OF_OPERATION_OF_LAW_OF_DIMINISHING_RETURNS\" title=\"CAUSES\nOF OPERATION OF LAW OF DIMINISHING RETURNS\">CAUSES\nOF OPERATION OF LAW OF DIMINISHING RETURNS<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#APPLICATION_OF_THE_LAW_OF_DIMINISHING_RETURNS_IN_DIFFERENT_FIELDS\" title=\"APPLICATION OF THE LAW OF DIMINISHING RETURNS IN DIFFERENT FIELDS\">APPLICATION OF THE LAW OF DIMINISHING RETURNS IN DIFFERENT FIELDS<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#1_In_Mining_Industries\" title=\"1.&nbsp;In Mining Industries:\">1.&nbsp;In Mining Industries:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#2_In_Fisheries\" title=\"2.&nbsp;In Fisheries:\">2.&nbsp;In Fisheries:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#3_In_House_Building_Industry\" title=\"3.&nbsp;In House Building Industry:\">3.&nbsp;In House Building Industry:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#4_In_Forest_Industry\" title=\"4.&nbsp;In Forest Industry:\">4.&nbsp;In Forest Industry:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#5_In_Manufacturing_Industries\" title=\"5.&nbsp;In Manufacturing Industries:\">5.&nbsp;In Manufacturing Industries:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#6_In_Intensive_and_Extensive_Cultivation\" title=\"6.&nbsp;In Intensive and Extensive\nCultivation:\">6.&nbsp;In Intensive and Extensive\nCultivation:<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#WHY_THE_LAW_APPLIES_TO_AGRICULTURE\" title=\"WHY THE LAW APPLIES TO&nbsp;AGRICULTURE?\">WHY THE LAW APPLIES TO&nbsp;AGRICULTURE?<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#1_Limited_Land\" title=\"1. Limited Land:\">1. Limited Land:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#2_Less_Use_of_Machinery\" title=\"2. Less Use of Machinery:\">2. Less Use of Machinery:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#3_Natural_Factors\" title=\"3. Natural Factors:\">3. Natural Factors:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#4_Seasonal_Occupation\" title=\"4. Seasonal Occupation:\">4. Seasonal Occupation:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#5_Difference_in_the_Fertility_of_Land\" title=\"5. Difference in the Fertility of Land:\">5. Difference in the Fertility of Land:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#6_Ineffective_Supervision\" title=\"6. Ineffective Supervision:\">6. Ineffective Supervision:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#7_Less_Chances_of_Division_of_Labour\" title=\"7. Less Chances of Division of Labour:\">7. Less Chances of Division of Labour:<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#IMPORTANCE_OF_LAW_OF_DIMINISHING_RETURNS\" title=\"IMPORTANCE OF LAW OF DIMINISHING RETURNS\">IMPORTANCE OF LAW OF DIMINISHING RETURNS<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#1_Theory_of_Population\" title=\"1. Theory of Population:\">1. Theory of Population:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#2_Basis_of_the_Theory_of_Production\" title=\"2. Basis of the Theory of Production:\">2. Basis of the Theory of Production:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#3_Basis_of_Innovation\" title=\"3. Basis of Innovation:\">3. Basis of Innovation:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-24\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#4_Basis_of_the_Theory_of_Rent\" title=\"4. Basis of the Theory of Rent:\">4. Basis of the Theory of Rent:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-25\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#5_Basis_of_the_Theory_of_Distribution\" title=\"5. Basis of the Theory of Distribution:\">5. Basis of the Theory of Distribution:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-26\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#6_Importance_to_Industry\" title=\"6. Importance to Industry:\">6. Importance to Industry:<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-27\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#LIMITATIONS_OF_THE_LAW_OF_DIMINISHING_RETURNS\" title=\"LIMITATIONS OF THE LAW OF DIMINISHING RETURNS\">LIMITATIONS OF THE LAW OF DIMINISHING RETURNS<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-28\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#1_New_Soil\" title=\"1. New Soil:\">1. New Soil:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-29\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#2_Improved_Methods_of_Cultivation\" title=\"2. Improved Methods of Cultivation:\">2. Improved Methods of Cultivation:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-30\" href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/#3_Shortage_of_Capital\" title=\"3. Shortage of Capital:\">3. Shortage of Capital:<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1 class=\"has-text-align-center wp-block-heading\" id=\"law-of-diminishing-returns\"><span class=\"ez-toc-section\" id=\"LAW_OF_DIMINISHING_RETURNS\"><\/span><strong>LAW\nOF DIMINISHING RETURNS<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h1>\n\n\n\n<p><strong>Diminishing returns<\/strong>, also called&nbsp;<strong>law of diminishing returns<\/strong>&nbsp;or&nbsp;<strong>principle of diminishing\nmarginal productivity<\/strong>, is an economic law stating that if one\ninput in the production of a commodity is increased while all other inputs are\nheld fixed, a point will eventually be reached at which additions of the input\nyield progressively smaller, or diminishing, increases in output.<\/p>\n\n\n\n<p>The&nbsp;law of\ndiminishing returns&nbsp;is also known as&nbsp;<strong>law\nof increasing&nbsp;costs<\/strong>.<\/p>\n\n\n\n<p>Law of diminishing returns explains that when more and\nmore units of a variable input are employed on a given quantity of fixed\ninputs, the total output may initially increase at increasing rate and then at\na constant rate, but it will eventually increase at diminishing rates.<\/p>\n\n\n\n<p>In other words, the total output initially increases with\nan increase in variable input at given quantity of fixed inputs, but it starts\ndecreasing after a point of time.<\/p>\n\n\n\n<p><strong>ACCORDING TO G. STIGLER<\/strong><\/p>\n\n\n\n<p>\u201cAs equal increments of one input are added; the inputs\nof other productive services being held, constant, beyond a certain point the\nresulting increments of product will decrease, i.e., the marginal product will\ndiminish.\u201d<\/p>\n\n\n\n<p><strong>ACCORDING TO ALFRED MARSHALL<\/strong><\/p>\n\n\n\n<p>\u201cAn increase in the Capital and Labour applied in the\ncultivation of land causes, in general, less than proportionate increase in the\namount of produce raised unless it happens to coincide with an improvement in\nthe art of agriculture.\u201d<\/p>\n\n\n\n<p><strong>ACCORDING TO F. BENHAM<\/strong><\/p>\n\n\n\n<p>\u201cAs the proportion of one factor in a combination of\nfactors is increased, after a point, first the marginal and then the average\nproduct of that factor will diminish.\u201d<\/p>\n\n\n\n<p><strong>ACCORDING TO SILVERMAN<\/strong><\/p>\n\n\n\n<p>\u201cAfter a certain point, an increase in the capital and\nlabour applied in proportion, causes a less than proportionate increase in the\namount of the product.\u201d<\/p>\n\n\n\n<p><strong>ACCORDING TO MRS. JOAN ROBINSON<\/strong><\/p>\n\n\n\n<p>\u201cLaw of Diminishing Return states that if any one means\nis static then the rate of quantity of other means will increase in a reducing\nrate.\u201d <\/p>\n\n\n\n<h2 class=\"has-text-align-center wp-block-heading\" id=\"assumptions-of-law-of-diminishing-returns\"><span class=\"ez-toc-section\" id=\"ASSUMPTIONS_OF_LAW_OF_DIMINISHING_RETURNS\"><\/span><strong>ASSUMPTIONS\nOF LAW OF DIMINISHING RETURNS<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The assumptions of the law of diminishing\nreturns are as follows:<\/p>\n\n\n\n<p><strong>NO\nCHANGE IN TECHNOLOGY<\/strong><\/p>\n\n\n\n<p>First of all, the law is based on the assumption that\nthere is no change in the techniques of production. If the techniques of\nproduction undergo a change, in that case the efficiency of production would\nincrease. Therefore, this law applies only if there is no change in the method\nof technology.<\/p>\n\n\n\n<p><strong>SHORT\nPERIOD<\/strong><\/p>\n\n\n\n<p>The law is applicable in the short run as supply of one\nor the other factor cannot be increased within the short span of time. Thus,\nthey are considered fixed.<\/p>\n\n\n\n<p><strong>THE QUANTITY OF LAND SHOULD BE CONSTANT AND FIXED:<\/strong><\/p>\n\n\n\n<p>This law will operate when the quantity of land is kept\nfixed and then other means like Labour and Capital\u2019s quantity is increased. If\nthis has not been followed then instead of diminishing return the law of\nincreasing return will operate.<\/p>\n\n\n\n<p><strong>MEASUREMENT OF PRODUCT<\/strong><\/p>\n\n\n\n<p>The output is measured in physical units like tones,\nkilograms etc.<\/p>\n\n\n\n<p><strong>THIS LAW IS CONCERNED WITH MARGINAL PRODUCTION AND NOT WITH TOTAL PRODUC\u00adTION<\/strong><\/p>\n\n\n\n<p>For operation of this law, we have to see and observe\nmarginal quantity of production and not the total quantity of production.<\/p>\n\n\n\n<p><strong>THIS LAW IS CONCERNED WITH THE PHYSICAL QUANTITY OF THE PRODUCTION AND NOT WITH ITS PRICE<\/strong><\/p>\n\n\n\n<p>Under this law quantity of production is kept into\nconsideration and not the price. Because in Diminishing Return when production\nwill go down the price may increase and the goods which are available may fetch\nhigher price.<\/p>\n\n\n\n<h2 class=\"has-text-align-center wp-block-heading\" id=\"explanation-of-the-law-of-diminishing-returns\"><span class=\"ez-toc-section\" id=\"EXPLANATION_OF_THE_LAW_OF_DIMINISHING_RETURNS\"><\/span><strong>EXPLANATION OF THE <strong>LAW OF DIMINISHING RETURNS<\/strong><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>The law of diminishing returns can be explained\nin two forms:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Law of Diminishing Returns<\/strong><\/li><\/ul>\n\n\n\n<p>This can be explained as follows:<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"577\" height=\"165\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/03\/image.png\" alt=\"\" class=\"wp-image-3772\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/03\/image.png 577w, https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/03\/image-300x86.png 300w\" sizes=\"(max-width: 577px) 100vw, 577px\" \/><\/figure>\n\n\n\n<p>It is seen from the table that the producer is employing different units of labour and capital in the cultivation of land. Here production is increasing at a diminishing rate with every increase in the unit of labour and capital on the fixed piece of land, i.e., two hectares and marginal and average production is diminishing. The <a href=\"https:\/\/commerceiets.com\/relationship-between-tp-ap-and-mp\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"marginal production (opens in a new tab)\">marginal production<\/a> of the next labourer is 3 quintals, 2 quintals and 1 quintal respectively. The law of diminishing returns can be explained with the help of a figure. In figure, units of labour and capital are given on OX-axis whereas marginal product is shown along OY axis.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"171\" height=\"159\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/03\/image-1-1.png\" alt=\"\" class=\"wp-image-3773\"\/><\/figure>\n\n\n\n<p>In this figure, Marginal Product slopes downward. This curve indicates that as more units of labour and capital are employed, every new unit is producing less marginal production than the preceding one. The marginal product in every successive unit declines to 3, 2 and 1 respectively. Thus curve DR indicates the diminishing marginal returns.<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Law of\nIncreasing Costs<\/strong><\/li><\/ul>\n\n\n\n<p>The law can also be explained in terms of average cost. When use of more units of labour and capital is accompanied by diminishing returns, then there is a tendency for the average cost of production to increase. That is why this law is called law of Increasing Costs. The fact is clearer in table 3 and Figure 3.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"576\" height=\"169\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/03\/image-2.png\" alt=\"\" class=\"wp-image-3774\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/03\/image-2.png 576w, https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/03\/image-2-300x88.png 300w\" sizes=\"(max-width: 576px) 100vw, 576px\" \/><figcaption><strong>LAW OF DIMINISHING RETURNS<\/strong><\/figcaption><\/figure>\n\n\n\n<p><a href=\"http:\/\/cdn.economicsdiscussion.net\/wp-content\/uploads\/2015\/05\/clip_image006_thumb21.jpg\" target=\"_blank\" rel=\"noopener\"><strong><br \/>\n<\/strong><\/a>The above table is based on the assumption that land is fixed\nfactor of production and total cost of one unit of labour is Rs. 40.00. At\nevery successive unit, total cost increases at the same time. Thus, at first\nunit of labour, the average cost of production comes to Rs. 8 per quintal.<\/p>\n\n\n\n<p>With the use of second, third and fourth units of labour and capital, it increases to Rs. 10, Rs. 12 and Rs. 14.5 respectively. <\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"163\" height=\"159\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/03\/image-3.png\" alt=\"\" class=\"wp-image-3775\"\/><figcaption><strong>LAW OF DIMINISHING RETURNS<\/strong><\/figcaption><\/figure>\n\n\n\n<p>In the diagram, units of labour and capital are shown on\nOX-axis and average cost on OY-axis. At every successive unit, average cost\nincreases from 8 to 10, 12 and 14.5. Therefore, upward slope of IC curve\nreflects increasing cost.<\/p>\n\n\n\n<h2 class=\"has-text-align-center wp-block-heading\" id=\"causes-of-operation-of-law-of-diminishing-returns\"><span class=\"ez-toc-section\" id=\"CAUSES_OF_OPERATION_OF_LAW_OF_DIMINISHING_RETURNS\"><\/span><strong>CAUSES\nOF OPERATION OF LAW OF DIMINISHING RETURNS<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>1.&nbsp;Prominence\nof Nature in Agriculture and Primary Industries:<\/strong><strong><\/strong><\/p>\n\n\n\n<p>Dr. Marshall has pointed out that the part\nwhich nature plays conforms to diminishing returns and the part which man play\nbrings in increasing return. It has been said by economist that nature is\nsupreme in agriculture, where-as man dominates in manufacturing industries.<\/p>\n\n\n\n<p><strong>2.&nbsp;Fixed\nSupply of the Factors:<\/strong><strong><\/strong><\/p>\n\n\n\n<p>Supply of some means are fixed, therefore,\nthis rule applies. For example\u2014The supply of land is fixed and if more of\nlabour and capital is introduced in the same land the Law of Diminishing Return\nis bound to operate.<\/p>\n\n\n\n<p><strong>3.&nbsp;Misuse\nor Improper Use of the Factors of Production:<\/strong><strong><\/strong><\/p>\n\n\n\n<p>Economists are of this opinion that proper and optimum\nuse of the factors of production should be made. If proper use has not been\nmade then the law will operate.<\/p>\n\n\n\n<p><strong>4.&nbsp;Lack of Perfect Substitutability between Factors:<\/strong><\/p>\n\n\n\n<p>In this all means of production are not perfect\nsubstitutes to each other. Therefore, by increasing one factor the loss of\nanother factor cannot be completed. For example\u2014By increasing the supply of\nlabour, the shortage of land cannot be met, therefore, the Law of Diminishing return\nis bound to operate.<\/p>\n\n\n\n<p><strong>5.&nbsp;Dis-economies in Production:<\/strong><\/p>\n\n\n\n<p>If the production is increased without considering its\neffects, then there will be dis-economies and the Law of Diminishing Return\nwill start operation.<\/p>\n\n\n\n<h2 class=\"has-text-align-center wp-block-heading\" id=\"application-of-the-law-of-diminishing-returns-in-different-fields\"><span class=\"ez-toc-section\" id=\"APPLICATION_OF_THE_LAW_OF_DIMINISHING_RETURNS_IN_DIFFERENT_FIELDS\"><\/span><strong>APPLICATION OF THE LAW OF DIMINISHING RETURNS IN DIFFERENT FIELDS<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Law of Diminishing Marginal Return does not apply in\nagriculture alone. Prof. Marshall says that this law is limited to agriculture\nonly but actually this is not the case. In the present age this law has become\na general law and is applicable to other industries also besides agriculture.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"1-in-mining-industries\"><span class=\"ez-toc-section\" id=\"1_In_Mining_Industries\"><\/span>1.&nbsp;In Mining Industries:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Law of Diminishing Return is applicable in mining\nindustries also. The amount of materials in the mine is limited. In mining\nindustries as more labour and capital is applied, so the level of depth has to\nbe increased. As the depth increases the expense and difficulties start\nincreasing. As more labour and capital is applied the marginal utility of mine\ngoes on decreasing.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"2-in-fisheries\"><span class=\"ez-toc-section\" id=\"2_In_Fisheries\"><\/span>2.&nbsp;In Fisheries:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>This law is applicable in fishing also. Limited area is\nthe chief reasons of it. In fishing as more labour and capital is increased the\nmarginal utility goes on decreasing. The reason is that the quantity of fishes\ngoes on decreasing day by day.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"3-in-house-building-industry\"><span class=\"ez-toc-section\" id=\"3_In_House_Building_Industry\"><\/span>3.&nbsp;In House Building Industry:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>The Law of Diminishing Return is also applicable in\nhouse-building industry. This law is applicable specially in the Case of\nmulti-Storeyed building. As labour and capital is applied for building the\nmaterials has to be carried higher and higher. The proportion of utility\nascertained is not equal to the proportion of labour and capital used.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"4-in-forest-industry\"><span class=\"ez-toc-section\" id=\"4_In_Forest_Industry\"><\/span>4.&nbsp;In Forest Industry:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>The law also applies in forest industry, first the wood\nof nearer place is taken and cutting goes on but as the wood of nearer place in\nexhausted, going to deep forest for wood would involve more expense and thus\nthe Law of Diminishing Return starts operation.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"5-in-manufacturing-industries\"><span class=\"ez-toc-section\" id=\"5_In_Manufacturing_Industries\"><\/span>5.&nbsp;In Manufacturing Industries:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Prof. Marshall\u2019s concept is that this law is not applied\nwith regard to manufacturing industries. According to Marshall in these\nindustries several internal and external benefits are required due to\nscientific inventions, division of labour and use of machines. So the cost of\nproduction decreases and marginal utility increases instead of decreasing.<\/p>\n\n\n\n<p>Modern economists do not agree with the Marshallian view.\nThey are of this opinion that this law is applicable in manufacturing\nindustries also. The difference is that in agriculture this law applies more\nquickly as compared to that of manufacturing industries. So it is clear that in\nmanufacturing industries also as labour and capital is increased the marginal\nutility goes on decreasing after a certain limit.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"6-in-intensive-and-extensive-cultivation\"><span class=\"ez-toc-section\" id=\"6_In_Intensive_and_Extensive_Cultivation\"><\/span>6.&nbsp;In Intensive and Extensive\nCultivation:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>The Law of Diminishing Return operates in both intensive\nand extensive cultivation. If more and more labour and capital are applied to\nthe same piece of land, the return per dose diminishes after some time. Thus,\nthe law applies to intensive cultivation. But if on the other hand the farmer\nbrings more and more land under cultivation even then the returns will\ndecrease.<\/p>\n\n\n\n<p>It is because, either the new land is inferior\n(otherwise, it would have been cultivated first) or because it, is at a\ndistance and in which the cost of transport increases the cost of production.\nThus, the Law of Diminishing returns also applies where cultivation is carried\non extensively.<\/p>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\" id=\"why-the-law-applies-to-agriculture\"><span class=\"ez-toc-section\" id=\"WHY_THE_LAW_APPLIES_TO_AGRICULTURE\"><\/span><strong>WHY THE LAW APPLIES TO&nbsp;AGRICULTURE?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The law of diminishing returns has a vast application,\nbut it specially applies in agriculture sector. The most important factors\nresponsible due to which the law is applicable in agriculture are undernoted:<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"1-limited-land\"><span class=\"ez-toc-section\" id=\"1_Limited_Land\"><\/span>1. Limited Land:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>The most important factor due to which this law applies\nto agriculture is the limited size of land. Production is sought to be\nincreased by employing more and more units of variable factors. This will\nresult in diminishing returns.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"2-less-use-of-machinery\"><span class=\"ez-toc-section\" id=\"2_Less_Use_of_Machinery\"><\/span>2. Less Use of Machinery:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>In the agricultural sector, there is limited use of\nmachinery as compared to industry. The reason is that in the agricultural\nsector most of the work is done by hands. This also results in low\nproductivity. Thus, agriculture remains deprived of several external and\ninternal economies of scale. Therefore, the law of diminishing returns applies\nin agricultural sector.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"3-natural-factors\"><span class=\"ez-toc-section\" id=\"3_Natural_Factors\"><\/span>3. Natural Factors:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Another reason due to which the law of diminishing\nreturns applies is the natural influence like rainfall, climate, floods etc.\nEven, in case man makes all best efforts but nature is not in favour, the law\nof diminishing returns is surely to apply.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"4-seasonal-occupation\"><span class=\"ez-toc-section\" id=\"4_Seasonal_Occupation\"><\/span>4. Seasonal Occupation:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Agriculture is a seasonal occupation. The people are not\nbusy on land throughout the year. They remain busy only during the period of ploughing\nand harvesting season. This period is approximately of six months. For the\nremaining period, both farmers and cattle remain idle which reduce the\nproduction per worker. It is, thus, the law of diminishing returns quickly\napplies to agriculture sector.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"5-difference-in-the-fertility-of-land\"><span class=\"ez-toc-section\" id=\"5_Difference_in_the_Fertility_of_Land\"><\/span>5. Difference in the Fertility of Land:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>All pieces of land are not equally fertile. When demand\nfor land increases even less fertile land are also brought under cultivation.\nIt means less marginal returns and high cost of production.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"6-ineffective-supervision\"><span class=\"ez-toc-section\" id=\"6_Ineffective_Supervision\"><\/span>6. Ineffective Supervision:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Agricultural operations are spread over the vast areas.\nTherefore, effective supervision becomes most risky and difficult. The result\nis the law of diminishing returns.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"7-less-chances-of-division-of-labour\"><span class=\"ez-toc-section\" id=\"7_Less_Chances_of_Division_of_Labour\"><\/span>7. Less Chances of Division of Labour:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>In agricultural sector, there are very less chances of\ndivision of labour. Therefore, production on large scale is ruled out. It also\nresults into the operation of the law of diminishing returns.<\/p>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\" id=\"importance-of-law-of-diminishing-returns\"><span class=\"ez-toc-section\" id=\"IMPORTANCE_OF_LAW_OF_DIMINISHING_RETURNS\"><\/span><strong>IMPORTANCE OF <strong>LAW OF DIMINISHING RETURNS<\/strong><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The law of diminishing returns is universal which applies\neverywhere. Marshall was of the view that this law is applicable in every\nbranch of industry or even in all human affairs. It is the basis of all laws.<\/p>\n\n\n\n<p><strong>The importance of the law is\ngiven below:<\/strong><\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"1-theory-of-population\"><span class=\"ez-toc-section\" id=\"1_Theory_of_Population\"><\/span>1. Theory of Population:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Malthusian theory of population is based on the law of\ndiminishing returns. According to Malthusian theory, production of food grains\ndoes not increase in the same proportion in which population increases. In\nother words, production of food grains increases in arithmetical ratio (1, 2,\n3, 4, 5,) whereas population increases in geometrical ratio (2, 4, 8, 16, 32,\n64\u2026). The reason is that agriculture obeys the law of diminishing returns.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"2-basis-of-the-theory-of-production\"><span class=\"ez-toc-section\" id=\"2_Basis_of_the_Theory_of_Production\"><\/span>2. Basis of the Theory of Production:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>The law of diminishing returns helps the producer to\ncalculate the optimum production. In simple terms, this law signifies whether\nthe optimum level of production in any field has reached or not.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"3-basis-of-innovation\"><span class=\"ez-toc-section\" id=\"3_Basis_of_Innovation\"><\/span>3. Basis of Innovation:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Basically, every producer wants to postpone the law. It\nis only possible when the new methods of production, new tools, raw materials\netc are innovated. All these factors put a check on the operation of the law of\ndiminishing returns.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"4-basis-of-the-theory-of-rent\"><span class=\"ez-toc-section\" id=\"4_Basis_of_the_Theory_of_Rent\"><\/span>4. Basis of the Theory of Rent:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Ricardian theory of rent is also based on this very law.\nAccording to Ricardian theory, rent Arises due to difference in fertility.\nFirst dose of labour and capital applied to land yields more return as compared\nto second dose. The difference between first and second dose is called the\nrent. It means:<\/p>\n\n\n\n<p><strong>Rent = Produce from first dose\n\u2013 Produce from second dose.<\/strong><\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"5-basis-of-the-theory-of-distribution\"><span class=\"ez-toc-section\" id=\"5_Basis_of_the_Theory_of_Distribution\"><\/span>5. Basis of the Theory of Distribution:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Marginal productivity theory of distribution is also\nbased on the law of diminishing returns. According to this theory, as the\nproducer employs more and more factors of production, the marginal productivity\nof each factor of production goes on falling. Thus, we can conclude that this\nlaw is the basis of the theory of distribution.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"6-importance-to-industry\"><span class=\"ez-toc-section\" id=\"6_Importance_to_Industry\"><\/span>6. Importance to Industry:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>The manufacturing industry has a great significance of\nthe law of diminishing returns. Every manufacturing industry has a higher per\ncapita income as compared to agricultural sector. The reason is that this law\noperates at a very early stage in the agricultural sector and the per capita\nincome remains low. But in the manufacturing industry, the operation of this\nlaw can be prevented for a very long period. This is the reason; it is called\nuniversal as it applies everywhere and anywhere. According to Wicksteed, \u201cThis\nlaw is as universal as the law of life itself\u2019.<\/p>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\" id=\"limitations-of-the-law-of-diminishing-returns\"><span class=\"ez-toc-section\" id=\"LIMITATIONS_OF_THE_LAW_OF_DIMINISHING_RETURNS\"><\/span><strong>LIMITATIONS OF THE <strong>LAW OF DIMINISHING RETURNS<\/strong><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Marshall has explained the law in general terms which is\nsubject to criticism. This means that the law is not applicable in all cases.<\/p>\n\n\n\n<p><strong>The limitations of the law are\ndiscussed as under:<\/strong><\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"1-new-soil\"><span class=\"ez-toc-section\" id=\"1_New_Soil\"><\/span>1. New Soil:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>The law of diminishing returns does not hold well in case\nof new soil i.e., when the land is cultivated for the first time. Certainly in\nsuch cases, production will be higher initially.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"2-improved-methods-of-cultivation\"><span class=\"ez-toc-section\" id=\"2_Improved_Methods_of_Cultivation\"><\/span>2. Improved Methods of Cultivation:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>In modern times, when there are improved methods of\ncultivation, this law is not applicable. The improved methods of production are\ncropping pattern, new seeds, and fertilizer, mechanization and irrigation\nfacilities. When these methods are used, there are good chances of more\nproduction. Thus, there are chances of increasing returns even in agriculture\nsector.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"3-shortage-of-capital\"><span class=\"ez-toc-section\" id=\"3_Shortage_of_Capital\"><\/span>3. Shortage of Capital:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>The law of diminishing returns does not apply in case of shortage of capital or insufficiency of capital. If, we have ample stock of capital, the law of increasing returns would operate and not the law of diminishing returns. These factors can check the operation of the law of diminishing returns temporarily. But this law is bound to apply ultimately. These can be delayed in the application of the law but the law is definite to apply sooner or later.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Also Study<\/strong><\/td><td><strong>Also Study<\/strong><\/td><td><strong>Also Study<\/strong><\/td><td><strong>Also Study<\/strong><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/demand\/\">Theory of Demand<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/law-of-demand\/\">Law of Demand<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/demand-function\/\">Demand Function<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/exceptions-of-law-of-demand\/\">Exceptions of law of demand<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/elasticity-of-demand\/\">Elasticity of demand<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/change-in-demand\/\">Change in demand<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/price-elasticity-of-demand\/\">Price elasticity of demand<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-law-of-demand-and-elasticity-of-demand\/\">Law of demand Vs Elasticity of demand<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/factors-affecting-price-elasticity-of-demand\/\">Factors affecting price elasticity of demand<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/production-function\/\">Production function<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-short-run-long-run-production-function\/\">Short run vs long run production function<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/law-of-variable-proportions\/\">Law of variable proportions<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/types-of-demand\/\">Types of demand<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/managerial-economics\/\">Managerial economics<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/characteristics-of-managerial-economics\/\">Characteristics of managerial economics<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/scope-of-managerial-economics\/\">Scope of managerial economics<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/utility-analysis\/\">Utility analysis<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/law-of-diminishing-marginal-utility\/\">Law of diminishing marginal utility<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/law-of-equi-marginal-utility\/\">Law of equi marginal utility<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/consumer-equilibrium\/\">Consumers Equilibrium<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/indifference-curve-analysis\/\">Indifference curve analysis<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/consumer-equilibrium-using-indifference-curve-analysis\/\">Consumer equilibrium using indifference curve analysis<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/relationship-between-tp-ap-and-mp\/\">Relationship between TP, AP and MP<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/law-of-increasing-returns\/\">Law of increasing returns<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/\">Law of diminishing returns<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/law-of-constant-returns\/\">Law of constant returns<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/returns-to-scale\/\">Returns to Scale<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/economies-and-diseconomies-of-scale\/\">Economies and diseconomies of scale<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/concept-of-costs\/\">Concept of costs<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/relationship-between-ac-and-mc\/\">Relationship between AC and MC<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/traditional-theory-of-cost\/\">Traditional theory of costs<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/modern-theory-of-cost\/\">Modern theory of costs<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/explicit-vs-implicit-costs\/\">Explicit vs Implicit costs<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/revenue\/\">Revenue<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/perfect-competition\/\">Perfect competition<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/monopoly-meaning\/\">Monopoly<\/a>&nbsp;<\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/price-discrimination\/\">Price discrimination<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-perfect-competition-and-monopoly\/\">Difference between perfect competition and monopoly<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/perfect-and-monopolistic-competition\/\">Perfect Vs Monopolistic competition<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/monopoly-and-monopolistic-competition\/\">Monopoly and monopolistic competition<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/product-differentiation-strategy\/\">Product differentiation strategy<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/monopolistic-competition\/\">Monopolistic competition<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/national-income-in-india\/\">National Income in India<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/measurement-of-national-income\/\">Measurement of national income in India<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/consumption-function\/\">Consumption function<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/keynesian-psychological-law-of-consumption\/\">Keynes Psychological law of consumption<\/a><\/td><td><\/td><td><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\" href=\"https:\/\/www.linkedin.com\/in\/kajal-mahajan-7549b2197\/\" target=\"_blank\" rel=\"noreferrer noopener\">CONNECT ON LINKEDIN<\/a><\/div>\n<\/div>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"266\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/04\/cropped-Presentation-resize-1024x266.jpg\" alt=\"LAW OF DIMINISHING RETURNS\" class=\"wp-image-787\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/04\/cropped-Presentation-resize-1024x266.jpg 1024w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/04\/cropped-Presentation-resize-300x78.jpg 300w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/04\/cropped-Presentation-resize-768x199.jpg 768w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/04\/cropped-Presentation-resize-1536x398.jpg 1536w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/04\/cropped-Presentation-resize.jpg 1920w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption>LAW OF DIMINISHING RETURNS<\/figcaption><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>LAW OF DIMINISHING RETURNS Diminishing returns, also called&nbsp;law of diminishing returns&nbsp;or&nbsp;principle of diminishing marginal productivity, is an economic law stating that if one input in the production of a commodity is increased while all other inputs are held fixed, a point will eventually be reached at which additions of the input yield progressively smaller, or&#8230;<\/p>\n<p class=\"more-link-wrap\"><a href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/\" class=\"more-link\">Read More<span class=\"screen-reader-text\"> &ldquo;LAW OF DIMINISHING RETURNS&rdquo;<\/span> &raquo;<\/a><\/p>\n","protected":false},"author":2,"featured_media":3771,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"rank_math_lock_modified_date":false,"footnotes":""},"categories":[113,92],"tags":[],"class_list":["post-3769","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-managerial-economics","category-micro-economics"],"_links":{"self":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/3769"}],"collection":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/comments?post=3769"}],"version-history":[{"count":0,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/3769\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media\/3771"}],"wp:attachment":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media?parent=3769"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/categories?post=3769"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/tags?post=3769"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}