Question

13.Explain in detail what happens to the law of long-term declining performance

13.Explain in detail what happens to the law of long-term declining performance

Homework Answers

Answer #1

Long Term Declining Performance is also known as Law of Dimishing Returns.

As per the law of diminishing returns, a unit addition of one factor of production, while all other factors remain constant, yields decreased per-unit incremental returns from the additional factor.

Basically it implies, when one additional factor of production is increased it causes the marginal product of additional factor to be smaller than the marginal product of the previous factor at some point.

Hence the performance of the factor reduces with each additional unit of the factor that is added.

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