law of diminishing returns comes into contact with another economic principle - increasing opportunity cost.It defines how will relate to each other cost factors of production, resources and production of goods and services.First, considered as cost increase will affect the number of products that are manufactured.And it provided that other factors remain unchanged.
This is well illustrated by the following example.Four units of any product produced using several factors acting in combination.Number of workers initially equal to two hundred.You can trace what will the gradual build-up of this factor (without changing the others), by increasing the number of employees each time for twenty people.It will be understood that an increase of the resource does not increase production, and hence income, but rather it slows the rate.Productivity of labor, its performance behaves similarly - falls.It works because the law of diminishing returns.
The reason for this effect is quite obvious.It should always be stored relationship between resource production, since they are well "work" only in the complex.As a rule, initially all the factors together agreed.Naturally, when one of them increases while the others remain fixed, there is a disparity.And in such conditions, when the increase in the workforce do not match other resources (for example, a sufficient amount of equipment, space, and so on. N.), There can be no question of comprehensive income.
In general, the law of diminishing returns has the following wording: "The increase in the release of some kind of production due to the increase of one factor at fixed other gradually falls."
There is one feature, which previously did not focus attention.Growth in output of goods does not fall immediately after the one factor increased.First, if the ratio is not affected much resources may even be increasing productivity.But it does not last long.Starting with a certain volume of the release of the goods, broken imbalances, and the law of diminishing returns comes into force.If you look at the overall picture, the process is as follows: the return of one type of resource always depends on its cost or amount.And it provided that other factors remain unchanged.There
indicators such as average and marginal returns.The latter shows the relation between the growth of output and an increase in resources.The average determines the volume of goods that produced, relate to costs that have caused this issue.
This means that the law of diminishing returns comes into force only when the costs reach a magnitude that will meet the most rational combination of factors.What happens if the costs increase slightly?In this case, the average return equal to the limit, and reaches its maximum.
considering the law of diminishing marginal returns, it is impossible to avoid operating with a term such as "limit (margin) size."They are called the increments.Marginal value of the index in the economy - is its increase due to changes in the factors affecting it, only one unit.That is the ultimate product - is the growth of its production due to the fact that the unit uses another factor affecting the release.In our case - an additional resource.
Thus, the law of diminishing returns suggests that increasing the use of one factor to boost the result, we must not forget that the effect depends on the ratio of the resource, which is involved in trafficking, with others, and not only on its magnitude.
