Question

hi please help with these two questions

5) Explain why the law of diminishing returns takes place for all goods/services.

6) Explain the concept of consumer optimum.

Answer 1

5) The law of diminishing returns, in other words is also called as the law of diminishing marginal returns, states that in a production process, as one input variable is increased, there will be a point at which the marginal output per unit will begin to decrease, keeping all other factors constant The law of diminishing returns is an economic principle which explains that as investment in a particular area increases, the rate of profit that emanates from that investment, increases upto a certain point and after it crosses that certain point, it cannot continue to increase if other variables remain at a constant.

In simpler words, the total productivity, for a given state of technology, is bound to increase with an increase in the quantity of a variable input. However, as the quantity of the inputs keeps on increasing, the marginal product increases upto a maximum, then starts to fall and then finally towards the end becomes negative. This is because the crowding of inputs eventually leads to a negative impact on the output

This principle applies all products and services