Only provide your opinions when specifically called for. In all other cases your
ID: 1163888 • Letter: O
Question
Only provide your opinions when specifically called for. In all other cases your answer(s) should rely on the text and module materials and not on the internet, showing your capacity to apply the appropriate economic principles and concepts correctly.
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What do economists mean by “diminishing returns” to an input? What causes diminishing returns? Have you ever observed this principle at work in a job you’ve had? Describe how you’ve experienced this concept in the real world.
Explanation / Answer
ANSWER : "Diminishing retirns" or the "law of diminishing returns" is the main principle of any production process. In economics, according to economists about "diminishing returns for an input" principle means that if in a production process a variable input level increase by remaining other inputs as constant then the marginal production per variable input decrease but the total production will increase at a decreasing rate. Although this total production level will decrease when the marginal production level per variable input is negative.
"Diminishing returns" occur because of increase in one input level remaining other input levels as constant. If other inputs remain constant only one single variable input level increase in the production process then this create congestion in production process and because of limited other variables the marginal production level per variable input decrease. Although this problem can be overcome if all input levels increase and there exist a balance in increasition of all inputs.
Yes, I realise and observe the "diminishing returns" principle in a company where I work. My working company has a firm who has two variable inputs : labour and capital and at a time in this firm the company preferred to increase the labour input level in production process while capital input remains same as before. As a result, after sometimes excess labour input creates congestion in production process because of limited capital which decrease the marginal production per labour but this increase the total production level at a decreasing rate for some times but after some times the total production level decrease when the marginal production level per labour is negative. From this situation of my working company I experienced the "diminishing returns of an input" principle.
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