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Law of Diminishing Returns

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Tina Song (Student-6F)
Flashcards by Tina Song (Student-6F), updated more than 1 year ago
Tina Song (Student-6F)
Created by Tina Song (Student-6F) over 5 years ago
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Law of Dinminisging Returns As successive units of a variable factor are added to given amount of fixed factor, there will come a point when each additional unit of the variable factor will produce less extra output than the previous unit and the TP will increase at a decreasing rate and MP will start to fall.
When MP>AP AP is rising
When MP<AP AP is falling
When MP=AP AP reaches to its max
Short run Period of time in which at least one factor of production is fixed
Long run Period of time in which all factors of production are variable, but the state of technology is fixed
TP Total amount that a firm produces using all of its factor of production in a given period
AP Total amount of output divided by the no. of units of variable factor employed. TP/Q
MP Refer to the additional output that is produced when you employ 1 extra unit of the variable factor ChangeTP/changeQ
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