Question
Why does law of diminishing returns operate?
Answer :
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Reasons for operation of the law:
(i) Inelasticity (fixity) supply of some factors: It is the fixity of the supply of land which sets the law of diminishing return in motion. In short period some
factors are fixed and given. When other variable factors are combined with this factor in increasing proportions, this fixed factor is distribute on the units of variable factors. After an ideal combination the proportion of variable factors to fixed factors become high. That is why diminishing return occurs.
(ii) Imperfect substitutes: According to Mrs. Joan Robinson the factors of production are imperfect substitute for one another. Capital can be
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