Economics 12 Notes for Economics Notes

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Application of Law of diminishing return especially in agriculture

Role of nature:
Nature plays vital role than man in agriculture. Natural factors like rainfall, landslide, sunlight, etc. are uncertain so marginal productivity off labor and capital starts to fall after a certain point.

Land as fixed factor:
In an economy the supply of land is fixed so production can be changed only by changing the proportion of labor and capital in relation to land. Due to the excess burden of these factor marginal productivity of land starts to decline.

Less scope of division of labor:
There is limited scope of division of labor in agriculture sector than industrial sector. Inadequate scope of labor which means low productivity. As additional units of labor capital are applied without any extension of division of labor invites law of diminishing return to scale.

Less supervision:
Cultivated areas are spread far and wide. It is physically very difficult to exercise adequate supervision. It causes diminishing returns.

Less use of machines:
There is less possibility to use machines in agriculture in comparison to industry. Due to inadequate use of machines in agriculture, output tends to diminish.

Differences in fertility of land:
Some lands are more fertile and sore are less fertile. As the demand for agricultural output increases, less and less fertile land also comes under cultivation. It also leads to diminishing return.

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