Misplaced Pages

#999

83-398: The modern understanding of the law adds the dimension of holding other outputs equal, since a given process is understood to be able to produce co-products. An example would be a factory increasing its saleable product, but also increasing its CO 2 production, for the same input increase. The law of diminishing returns is a fundamental principle of both micro and macro economics and it plays

166-458: A good or service which has value and contributes to the utility of individuals. The area of economics that focuses on production is called production theory, and it is closely related to the consumption(or consumer) theory of economics. The production process and output directly result from productively utilising the original inputs (or factors of production ). Known as primary producer goods or services, land, labour, and capital are deemed

249-482: A central role in production theory . The concept of diminishing returns can be explained by considering other theories such as the concept of exponential growth . It is commonly understood that growth will not continue to rise exponentially, rather it is subject to different forms of constraints such as limited availability of resources and capitalisation which can cause economic stagnation . This example of production holds true to this common understanding as production

332-432: A change in production input and a change in productivity. The figure illustrates an income generation process (exaggerated for clarity). The Value T2 (value at time 2) represents the growth in output from Value T1 (value at time 1). Each time of measurement has its own graph of the production function for that time (the straight lines). The output measured at time 2 is greater than the output measured at time one for both of

415-405: A criterion of profitability, surplus value refers to the difference between returns and costs, taking into consideration the costs of equity in addition to the costs included in the profit and loss statement as usual. Surplus value indicates that the output has more value than the sacrifice made for it, in other words, the output value is higher than the value (production costs) of the used inputs. If

498-425: A diminishing rate of return on HDI. Just think, in a low income family, an average increase of income will likely make a huge impact on the wellbeing of the family. Parents could provide abundantly more food and healthcare essentials for their family. That is a significantly increasing rate of return. But, if you gave the same increase to a wealthy family, the impact it would have on their life would be minor. Therefore,

581-414: A few of the critical elements that significantly influence production economically. Within production, efficiency plays a tremendous role in achieving and maintaining full capacity, rather than producing an inefficient (not optimal) level. Changes in efficiency relate to the positive shift in current inputs, such as technological advancements, relative to the producer's position. Efficiency is calculated by

664-466: A logic, objectives, theory and key figures of its own. It is important to examine each of them individually, yet, as a part of the whole, in order to be able to measure and understand them. The main processes of a company are as follows: Production output is created in the real process, gains of production are distributed in the income distribution process and these two processes constitute the production process. The production process and its sub-processes,

747-407: A negative value, the same idea as in the diminishing rate of return inevitable to the production process. The concept of diminishing returns can be traced back to the concerns of early economists such as Johann Heinrich von Thünen , Jacques Turgot , Adam Smith , James Steuart , Thomas Robert Malthus , and David Ricardo . The law of diminishing returns can be traced back to the 18th century, in

830-437: A production income model and a production analysis model in order to demonstrate production function as a phenomenon and a measureable quantity. The scale of success run by a going concern is manifold, and there are no criteria that might be universally applicable to success. Nevertheless, there is one criterion by which we can generalise the rate of success in production. This criterion is the ability to produce surplus value. As

913-403: A production increase of an output of a production process. It is usually expressed as a growth percentage depicting growth of the real production output. The real output is the real value of products produced in a production process and when we subtract the real input from the real output we get the real income. The real output and the real income are generated by the real process of production from

SECTION 10

#1732858251001

996-403: A production increase over consumption is seen as increased productivity. In an economic market, production input and output prices are assumed to be set from external factors as the producer is the price taker. Hence, pricing is an important element in the real-world application of production economics. Should the pricing be too high, the production of the product is simply unviable. There is also

1079-416: A real measuring situation and most importantly the change in the output-input mix between two periods. Hence, the basic example works as an illustrative “scale model” of production without any features of a real measuring situation being lost. In practice, there may be hundreds of products and inputs but the logic of measuring does not differ from that presented in the basic example. In this context, we define

1162-427: A single unit of a good generally increases as a society attempts to produce more of that good. This explains the bowed-out shape of the production possibilities frontier . Part of the reason one input is altered ceteris paribus , is the idea of disposability of inputs. With this assumption, essentially that some inputs are above the efficient level. Meaning, they can decrease without perceivable impact on output, after

1245-494: A strong link between pricing and consumption, with this influencing the overall production scale. In principle there are two main activities in an economy, production and consumption. Similarly, there are two kinds of actors, producers and consumers. Well-being is made possible by efficient production and by the interaction between producers and consumers. In the interaction, consumers can be identified in two roles both of which generate well-being. Consumers can be both customers of

1328-423: Is a low productivity job. As a result, average productivity decreases but the real income per capita increases. Furthermore, the well-being of the society also grows. This example reveals the difficulty to interpret the total productivity change correctly. The combination of volume increase and total productivity decrease leads in this case to the improved performance because we are on the “diminishing returns” area of

1411-684: Is a widely recognised production function in economics: Q= f(NR, L, K, t, E) : Start from the equation for the marginal product: Δ O u t Δ I n 1 = f ( I n 2 , I n 1 + Δ I n 1 ) − f ( I n 1 , I n 2 ) Δ I n 1 {\displaystyle {\Delta Out \over \Delta In_{1}}={{f(In_{2},In_{1}+\Delta In_{1})-f(In_{1},In_{2})} \over \Delta In_{1}}} To demonstrate diminishing returns, two conditions are satisfied; marginal product

1494-426: Is an inverse relationship between returns of inputs and the cost of production, although other features such as input market conditions can also affect production costs. Suppose that a kilogram of seed costs one dollar , and this price does not change. Assume for simplicity that there are no fixed costs . One kilogram of seeds yields one ton of crop, so the first ton of the crop costs one dollar to produce. That is, for

1577-436: Is called constant returns. Further along the production curve at, for example 100 employees, floor space is likely getting crowded, there are too many people operating the machines and in the building, and workers are getting in each other's way. Increasing the number of employees by two percent (from 100 to 102 employees) would increase output by less than two percent and this is called "diminishing returns." After achieving

1660-469: Is distributed through the interaction between the company's stakeholders. The stakeholders of companies are economic actors which have an economic interest in a company. Based on the similarities of their interests, stakeholders can be classified into three groups in order to differentiate their interests and mutual relations. The three groups are as follows: Customers The customers of a company are typically consumers, other market producers or producers in

1743-419: Is improving quality-price-ratio of goods and services and increasing incomes from growing and more efficient market production, and the second is total production which help in increasing GDP . The most important forms of production are: In order to understand the origin of economic well-being, we must understand these three production processes. All of them produce commodities which have value and contribute to

SECTION 20

#1732858251001

1826-553: Is positive, and marginal product is decreasing. Elasticity , a function of input and output, ϵ = I n O u t ⋅ δ O u t δ I n {\displaystyle \epsilon ={In \over Out}\cdot {\delta Out \over \delta In}} , can be taken for small input changes. If the above two conditions are satisfied, then 0 < ϵ < 1 {\displaystyle 0<\epsilon <1} . This works intuitively; There

1909-536: Is seen as the key economic indicator of innovation. The successful introduction of new products and new or altered processes, organization structures, systems, and business models generates growth of output that exceeds the growth of inputs. This results in growth in productivity or output per unit of input. Income growth can also take place without innovation through replication of established technologies. With only replication and without innovation, output will increase in proportion to inputs. (Jorgenson et al. 2014, 2) This

1992-446: Is subject to the four factors of production which are land, labour, capital and enterprise. These factors have the ability to influence economic growth and can eventually limit or inhibit continuous exponential growth. Therefore, as a result of these constraints the production process will eventually reach a point of maximum yield on the production curve and this is where marginal output will stagnate and move towards zero. Innovation in

2075-399: Is the "primus motor" of economic well-being. The underlying assumption of production is that maximisation of profit is the key objective of the producer. The difference in the value of the production values (the output value) and costs (associated with the factors of production) is the calculated profit. Efficiency, technological, pricing, behavioural, consumption and productivity changes are

2158-484: Is the case of income growth through production volume growth. Jorgenson et al. (2014, 2) give an empiric example. They show that the great preponderance of economic growth in the US since 1947 involves the replication of existing technologies through investment in equipment, structures, and software and expansion of the labor force. Further, they show that innovation accounts for only about twenty percent of US economic growth. In

2241-485: Is the change in output from increasing the number of workers used by one person, or by adding one more machine to the production process in the short run. The law of diminishing marginal returns points out that as more units of a variable input are added to fixed amounts of land and capital, the change in total output would rise firstly and then fall. The length of time required for all the factor of production to be flexible varies from industry to industry. For example, in

2324-427: The absolute measure, i.e. the real income and its derivatives as a criterion of production performance. Maximizing productivity also leads to the phenomenon called " jobless growth " This refers to economic growth as a result of productivity growth but without creation of new jobs and new incomes from them. A practical example illustrates the case. When a jobless person obtains a job in market production we may assume it

2407-471: The average production performance, we use the known productivity ratio The absolute income of performance is obtained by subtracting the real input from the real output as follows: The growth of the real income is the increase of the economic value that can be distributed between the production stakeholders. With the aid of the production model we can perform the average and absolute accounting in one calculation. Maximizing production performance requires using

2490-432: The capital on the floor (e.g. manufacturing machines, pre-existing technology, warehouses) is held constant, increasing from one employee to two employees is, theoretically, going to more than double production possibilities and this is called increasing returns. If 50 people are employed, at some point, increasing the number of employees by two percent (from 50 to 51 employees) would increase output by two percent and this

2573-425: The case of a single production process (described above) the output is defined as an economic value of products and services produced in the process. When we want to examine an entity of many production processes we have to sum up the value-added created in the single processes. This is done in order to avoid the double accounting of intermediate inputs. Value-added is obtained by subtracting the intermediate inputs from

Diminishing returns - Misplaced Pages Continue

2656-452: The components of growth: an increase of inputs and an increase of productivity. The portion of growth caused by the increase in inputs is shown on line 1 and does not change the relation between inputs and outputs. The portion of growth caused by an increase in productivity is shown on line 2 with a steeper slope. So increased productivity represents greater output per unit of input. The growth of production output does not reveal anything about

2739-567: The concept of production function. We can use mathematical formulae, which are typically used in macroeconomics (in growth accounting) or arithmetical models, which are typically used in microeconomics and management accounting. We do not present the former approach here but refer to the survey “Growth accounting” by Hulten 2009. Also see an extensive discussion of various production models and their estimations in Sickles and Zelenyuk (2019, Chapter 1-2). We use here arithmetical models because they are like

2822-413: The conclusion that the production functions of the company and its suppliers are in a state of continuous change. Producers Those participating in production, i.e., the labour force, society and owners, are collectively referred to as the producer community or producers. The producer community generates income from developing and growing production. The well-being gained through commodities stems from

2905-508: The cusp of the First Industrial Revolution , it was motivated with single outputs in mind. In recent years, economists since the 1970s have sought to redefine the theory to make it more appropriate and relevant in modern economic societies. Specifically, it looks at what assumptions can be made regarding number of inputs, quality, substitution and complementary products, and output co-production, quantity and quality. The origin of

2988-413: The first ton of output, the marginal cost as well as the average cost of the output is per ton. If there are no other changes, then if the second kilogram of seeds applied to land produces only half the output of the first (showing diminishing returns), the marginal cost would equal per half ton of output, or per ton, and the average cost is per 3/2 tons of output, or /3 per ton of output. Similarly, if

3071-530: The form of technological advances or managerial progress can minimise or eliminate diminishing returns to restore productivity and efficiency and to generate profit. This idea can be understood outside of economics theory, for example, population. The population size on Earth is growing rapidly, but this will not continue forever (exponentially). Constraints such as resources will see the population growth stagnate at some point and begin to decline. Similarly, it will begin to decline towards zero but not actually become

3154-422: The importance of marginal output or marginal returns . Returns eventually diminish because economists measure productivity with regard to additional units (marginal). Additional inputs significantly impact efficiency or returns more in the initial stages. The point in the process before returns begin to diminish is considered the optimal level. Being able to recognize this point is beneficial, as other variables in

3237-479: The inputs and the outputs are not allowed to be aggregated in measuring and accounting. If they are aggregated, they are no longer homogenous and hence the measurement results may be biased. Marginal return Marginal Return is the rate of return for a marginal increase in investment; roughly, this is the additional output resulting from a one-unit increase in the use of a variable input , while other inputs are constant. This economics -related article

3320-470: The law of diminishing returns was developed primarily within the agricultural industry. In the early 19th century, David Ricardo as well as other English economists previously mentioned, adopted this law as the result of the lived experience in England after the war. It was developed by observing the relationship between prices of wheat and corn and the quality of the land which yielded the harvests. The observation

3403-404: The logic of the production function. Two components can also be distinguished in the income change: the income growth caused by an increase in production input (production volume) and the income growth caused by an increase in productivity. The income growth caused by increased production volume is determined by moving along the production function graph. The income growth corresponding to a shift of

Diminishing returns - Misplaced Pages Continue

3486-451: The manner of excessive fertiliser on a field. If input disposability is assumed, then increasing the principal input, while decreasing those excess inputs, could result in the same "diminished return", as if the principal input was changed certeris paribus . While considered "hard" inputs, like labour and assets, diminishing returns would hold true. In the modern accounting era where inputs can be traced back to movements of financial capital,

3569-402: The manufacturing industries like motor vehicles. In the tertiary industry such as service or knowledge industries, it is harder to measure the outputs since they are less tangible. The second way of measuring production and efficiency is average output. It measures output per-worker-employed or output-per-unit of capital. The third measures of production and efficiency is the marginal product. It

3652-402: The maximum potential output divided by the actual input. An example of the efficiency calculation is that if the applied inputs have the potential to produce 100 units but are producing 60 units, the efficiency of the output is 0.6, or 60%. Furthermore, economies of scale identify the point at which production efficiency (returns) can be increased, decrease or remain constant. This element sees

3735-507: The models of management accounting, illustrative and easily understood and applied in practice. Furthermore, they are integrated to management accounting, which is a practical advantage. A major advantage of the arithmetical model is its capability to depict production function as a part of production process. Consequently, production function can be understood, measured, and examined as a part of production process. There are different production models according to different interests. Here we use

3818-440: The natural resources above and below the soil. However, there is a difference between human capital and labour. In addition to the common factors of production, in different economic schools of thought, entrepreneurship and technology are sometimes considered evolved factors in production. It is common practice that several forms of controllable inputs are used to achieve the output of a product. The production function assesses

3901-423: The nuclear power industry, it takes many years to commission new nuclear power plant and capacity. Real-life examples of the firm's short - term production equations may not be quite the same as the smooth production theory of the department. In order to improve efficiency and promote the structural transformation of economic growth, it is most important to establish the industrial development model related to it. At

3984-410: The ongoing adaption of technology at the frontier of the production function. Technological change is a significant determinant in advancing economic production results, as noted throughout economic histories, such as the industrial revolution. Therefore, it is critical to continue to monitor its effects on production and promote the development of new technologies. There is a strong correlation between

4067-470: The outputs. The most well-known and used measure of value-added is the GDP (Gross Domestic Product). It is widely used as a measure of the economic growth of nations and industries. The production performance can be measured as an average or an absolute income. Expressing performance both in average (avg.) and absolute (abs.) quantities is helpful for understanding the welfare effects of production. For measurement of

4150-401: The performance of the production process. The performance of production measures production's ability to generate income. Because the income from production is generated in the real process, we call it the real income. Similarly, as the production function is an expression of the real process, we could also call it "income generated by the production function". The real income generation follows

4233-433: The point of maximum output, employing additional workers, this will give negative returns. Through each of these examples, the floor space and capital of the factor remained constant, i.e., these inputs were held constant. By only increasing the number of people, eventually the productivity and efficiency of the process moved from increasing returns to diminishing returns. To understand this concept thoroughly, acknowledge

SECTION 50

#1732858251001

4316-479: The price-quality relations of the commodities. Due to competition and development in the market, the price-quality relations of commodities tend to improve over time. Typically the quality of a commodity goes up and the price goes down over time. This development favourably affects the production functions of customers. Customers get more for less. Consumer customers get more satisfaction at less cost. This type of well-being generation can only partially be calculated from

4399-545: The prices of the products had risen due to the Napoleonic Wars , which affected international trade and caused farmers to move to lands which were undeveloped and further away. In addition, at the end of the Napoleonic Wars, grain imports were restored which caused a decline in prices because the farmers needed to attract customers and sell their products faster. Classical economists such as Malthus and Ricardo attributed

4482-484: The producer imply surplus value to the consumer, and on the basis of the market price this value is shared by the consumer and the producer in the marketplace. This is the mechanism through which surplus value originates to the consumer and the producer likewise. Surplus values to customers cannot be measured from any production data. Instead the surplus value to a producer can be measured. It can be expressed both in terms of nominal and real values. The real surplus value to

4565-450: The producer is an outcome of the real process, real income, and measured proportionally it means productivity. The concept "real process" in the meaning quantitative structure of production process was introduced in Finnish management accounting in the 1960s. Since then it has been a cornerstone in the Finnish management accounting theory. (Riistama et al. 1971) Income distribution process of

4648-530: The producer lower producer income, to be compensated with higher sales volume. Economic well-being also increases due to income gains from increasing production. Market production is the only production form that creates and distributes incomes to stakeholders. Public production and household production are financed by the incomes generated in market production. Thus market production has a double role: creating well-being and producing goods and services and income creation. Because of this double role, market production

4731-470: The producer's behaviour and the underlying assumption of production – both assume profit maximising behaviour. Production can be either increased, decreased or remain constant as a result of consumption, amongst various other factors. The relationship between production and consumption is mirror against the economic theory of supply and demand . Accordingly, when production decreases more than factor consumption, this results in reduced productivity. Contrarily,

4814-432: The producers and suppliers to the producers. The customers' well-being arises from the commodities they are buying and the suppliers' well-being is related to the income they receive as compensation for the production inputs they have delivered to the producers. Stakeholders of production are persons, groups or organizations with an interest in a producing company. Economic well-being originates in efficient production and it

4897-410: The producing community. Similarly, the high income level achieved in the community is a result of the high volume of production and its good performance. This type of well-being generation – as mentioned earlier - can be reliably calculated from the production data. A producing company can be divided into sub-processes in different ways; yet, the following five are identified as main processes, each with

4980-459: The production data. The situation is presented in this study. The producer community (labour force, society, and owners) earns income as compensation for the inputs they have delivered to the production. When the production grows and becomes more efficient, the income tends to increase. In production this brings about an increased ability to pay salaries, taxes and profits. The growth of production and improved productivity generate additional income for

5063-465: The production function can be altered rather than continually increasing labor. Further, examine something such as the Human Development Index , which would presumably continue to rise so long as GDP per capita (in purchasing power parity terms) was increasing. This would be a rational assumption because GDP per capita is a function of HDI. Even GDP per capita will reach a point where it has

SECTION 60

#1732858251001

5146-416: The production function is generated by the increase in productivity. The change of real income so signifies a move from the point 1 to the point 2 on the production function (above). When we want to maximize the production performance we have to maximize the income generated by the production function. The sources of productivity growth and production volume growth are explained as follows. Productivity growth

5229-399: The production function. If we are on the part of “increasing returns” on the production function, the combination of production volume increase and total productivity increase leads to improved production performance. Unfortunately, we do not know in practice on which part of the production function we are. Therefore, a correct interpretation of a performance change is obtained only by measuring

5312-402: The production output from input, and it can be described by means of the production function . It refers to a series of events in production in which production inputs of different quality and quantity are combined into products of different quality and quantity. Products can be physical goods, immaterial services and most often combinations of both. The characteristics created into the product by

5395-513: The production refers to a series of events in which the unit prices of constant-quality products and inputs alter causing a change in income distribution among those participating in the exchange. The magnitude of the change in income distribution is directly proportionate to the change in prices of the output and inputs and to their quantities. Productivity gains are distributed, for example, to customers as lower product sales prices or to staff as higher income pay. The production process consists of

5478-772: The public sector. Each of them has their individual production functions. Due to competition, the price-quality-ratios of commodities tend to improve and this brings the benefits of better productivity to customers. Customers get more for less. In households and the public sector this means that more need satisfaction is achieved at less cost. For this reason, the productivity of customers can increase over time even though their incomes remain unchanged. Suppliers The suppliers of companies are typically producers of materials, energy, capital, and services. They all have their individual production functions. The changes in prices or qualities of supplied commodities have an effect on both actors' (company and suppliers) production functions. We come to

5561-492: The quality requirements for the production data used in productivity accounting. The most important criterion of good measurement is the homogenous quality of the measurement object. If the object is not homogenous, then the measurement result may include changes in both quantity and quality but their respective shares will remain unclear. In productivity accounting this criterion requires that every item of output and input must appear in accounting as being homogenous. In other words,

5644-831: The rate of return provided by that average increase in income is diminishing. Signify O u t p u t = O   ,   I n p u t = I   ,   O = f ( I ) {\displaystyle Output=O\ ,\ Input=I\ ,\ O=f(I)} Increasing Returns: 2 ⋅ f ( I ) < f ( 2 ⋅ I ) {\displaystyle 2\cdot f(I)<f(2\cdot I)} Constant Returns: 2 ⋅ f ( I ) = f ( 2 ⋅ I ) {\displaystyle 2\cdot f(I)=f(2\cdot I)} Diminishing Returns: 2 ⋅ f ( I ) > f ( 2 ⋅ I ) {\displaystyle 2\cdot f(I)>f(2\cdot I)} There

5727-408: The real income change. In the short run, the production function assumes there is at least one fixed factor input. The production function relates the quantity of factor inputs used by a business to the amount of output that result. There are three measure of production and productivity. The first one is total output (total product). It is straightforward to measure how much output is being produced in

5810-480: The real inputs. The real process can be described by means of the production function. The production function is a graphical or mathematical expression showing the relationship between the inputs used in production and the output achieved. Both graphical and mathematical expressions are presented and demonstrated. The production function is a simple description of the mechanism of income generation in production process. It consists of two components. These components are

5893-423: The real process and income distribution process occur simultaneously, and only the production process is identifiable and measurable by the traditional accounting practices. The real process and income distribution process can be identified and measured by extra calculation, and this is why they need to be analyzed separately in order to understand the logic of production and its performance. Real process generates

5976-409: The real process and the income distribution process. A result and a criterion of success of the owner is profitability. The profitability of production is the share of the real process result the owner has been able to keep to himself in the income distribution process. Factors describing the production process are the components of profitability , i.e., returns and costs. They differ from the factors of

6059-403: The real process in that the components of profitability are given at nominal prices whereas in the real process the factors are at periodically fixed prices. Monetary process refers to events related to financing the business. Market value process refers to a series of events in which investors determine the market value of the company in the investment markets. Economic growth may be defined as

6142-408: The relationship between the inputs and the quantity of output. Economic welfare is created in a production process, meaning all economic activities that aim directly or indirectly to satisfy human wants and needs . The degree to which the needs are satisfied is often accepted as a measure of economic welfare. In production there are two features which explain increasing economic welfare. The first

6225-447: The same case may reflect constant, or increasing returns. It is necessary to be clear of the "fine structure" of the inputs before proceeding. In this, ceteris paribus is disambiguating. Production theory basics Production is the process of combining various inputs, both material (such as metal, wood, glass, or plastics) and immaterial (such as plans, or knowledge ) in order to create output. Ideally this output will be

6308-423: The same time, a shift should be made to models that contain typical characteristics of the industry, such as specific technological changes and significant differences in the likelihood of substitution before and after investment. A production model is a numerical description of the production process and is based on the prices and the quantities of inputs and outputs. There are two main approaches to operationalize

6391-442: The successive diminishment of output to the decreasing quality of the inputs whereas Neoclassical economists assume that each "unit" of labor is identical. Diminishing returns are due to the disruption of the entire production process as additional units of labor are added to a fixed amount of capital. The law of diminishing returns remains an important consideration in areas of production such as farming and agriculture. Proposed on

6474-402: The surplus value is positive, the owner's profit expectation has been surpassed. The table presents a surplus value calculation. We call this set of production data a basic example and we use the data through the article in illustrative production models. The basic example is a simplified profitability calculation used for illustration and modelling. Even as reduced, it comprises all phenomena of

6557-409: The third kilogram of seeds yields only a quarter ton, then the marginal cost equals per quarter ton or per ton, and the average cost is per 7/4 tons, or /7 per ton of output. Thus, diminishing marginal returns imply increasing marginal costs and increasing average costs. Cost is measured in terms of opportunity cost . In this case the law also applies to societies – the opportunity cost of producing

6640-417: The three fundamental factors of production . These primary inputs are not significantly altered in the output process, nor do they become a whole component in the product. Under classical economics , materials and energy are categorised as secondary factors as they are byproducts of land, labour and capital. Delving further, primary factors encompass all of the resourcing involved, such as land, which includes

6723-540: The well-being of individuals. The satisfaction of needs originates from the use of the commodities which are produced. The need satisfaction increases when the quality-price-ratio of the commodities improves and more satisfaction is achieved at less cost. Improving the quality-price-ratio of commodities is to a producer an essential way to improve the competitiveness of products but this kind of gains distributed to customers cannot be measured with production data. Improving product competitiveness often means lower prices and to

6806-423: The work of Jacques Turgot. He argued that "each increase [in an input] would be less and less productive." In 1815, David Ricardo, Thomas Malthus, Edward West , and Robert Torrens applied the concept of diminishing returns to land rent. These works were relevant to the committees of Parliament in England, who were investigating why grain prices were so high, and how to reduce them. The four economists concluded that

6889-405: Was that at a certain point, that the quality of the land kept increasing, but so did the cost of produce etc. Therefore, each additional unit of labour on agricultural fields, actually provided a diminishing or marginally decreasing return. A common example of diminishing returns is choosing to hire more people on a factory floor to alter current manufacturing and production capabilities. Given that

#999