The Law of Diminishing Returns
1. What Is the Law of Diminishing Marginal Returns?
It states that smaller increase in output can result from adding some additional factor on products. (Page 186)
2. When did the law of diminishing start?
It started at the 18th century. (Page 186)
3. Who published the tracts to develop the diminishing of law and when was that?
The tracts were published by David Ricardo, Thomas Malthus, Edward West, and Robert Torrens in the year 1815. (Page 186)
4. What causes the land to lose its productivity?
It loses productivity when it reduces its quality such as fertile soils. (Page 187)
5. According to Ricardo, what causes the land to be more productive?
He says that productivity of land can only be improved by increasing the capital during planting process. (Page 187)
6. Where else can law of diminishing be applied?
According to Malthus this law can also be applied on grain prices and he says that food production could only grow arithmetically. (Page 187)
7. What is the nature of soil?
It’s the nature of soil that it gradually reduces productivity as it loses fertility over period of time. (Page 187)
8. What was Nassau senior’s view toward the law of diminishing?
He had a feeling that it was one of his most four prepositions. And as an explanation of diminishing returns that differentiates between the average and marginal costs. (Page 187)
9. What was Edgeworth’s approach towards the law?
He made an assumption that the input of land was fixed. Then he created a table that he used to prove on the productions. (Page 187)
10. What did the values in the table demonstrate?
They showed the relationships between total, marginal, and average product. (Page 187)
11. Was Edgeworth’s idea applicable on agriculture only?
No, it was also applicable on manufacturing industries. (Page 187)
12. Why are the units in agriculture referred to be homogeneous?
This is because they are interchangeable and each of them has a great role for achieving great output. (Page 188)
13. What role does the law of diminishing play?
The law gives central explanation on why there is downward-sloping short-run in demand curves. (Page 188)
14. What was Karl Menger’s view towards the law?
Depending on the assumptions made on the diminishing returns, every assumption is correct since it gives the required output. (Page 189)
15. Why did Menger criticize the axiomatic acceptance?
He did this because in economics no need to argue on whether the law is true or not. (Page 189)
16. What was Andrew’s advice to manufacturing businesses?
He urged then to maintain high capacity in order they don’t their customers in times of demand. (Page 189)
17. What else can replace the law of diminishing?
It can be replaced by the idea of heterogeneous scares resources. (Page 190)
18. When does the idea of heterogeneous apply?
It can only be used when there are great and aggregate changes in involved quantities. (Page 190)
19. What is the impact if the law of diminishing returns did not exist?
Without this law, it could be difficult to have production and hence the living standards go down.
20. Does output depend on the cost?
Yes, because cost increase with increase in output since the workers feels motivated and tend to work hander. (Page 191)