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Economics A Level (DONEEEEEEE)

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Question:

Why does the Law of Diminishing Returns occur?

Author: eric_galvao



Answer:

-As you add more of a Factor of Production (labour) Marginal Product will start in the Beginning. Each Labour —> More Output than one before -Happens perhaps due to Specialisation - more Labour is employed = more tasks can be done -But, as you keep adding more Labour, the other Fixed Factors of Production (capital) will limit the extra output that’s Gained: MP Falls. -When that happens (MP beginning to Fall) that is the Point of Diminishing Returns.


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-As you add more of a Factor of Production (labour) Marginal Product will start in the Beginning. Each Labour —> More Output than one before
-Happens perhaps due to Specialisation - more Labour is employed = more tasks can be done 
-But, as you keep adding more Labour, the other Fixed Factors of Production (capital) will limit the extra output that’s Gained: MP Falls. 
-When that happens (MP beginning to Fall) that is the Point of Diminishing Returns.
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