Law of Diminishing Returns

Law of Diminishing Returns - input X, holding its use of...

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1 Law of Diminishing Returns 1. Malthusian entry. 2. Law of Diminishing Returns. 3. The Future. 4. Technical efficiency. Thomas Malthus “An Essay on the Principle of Population” (1798). • Breeding leads to exponential population growth. • Food supplies cannot grow that rapidly. Only starvation (and wars and disease) will check population growth, so poverty is inevitable. Law of Diminishing Returns Law of Diminishing Returns: As a firm increases its use of any one
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Unformatted text preview: input X, holding its use of other inputs constant, eventually the marginal product of input X declines. The marginal product of input X is the additional output produced by using one more unit of input X. Technical Efficiency A firm achieves technical efficiency when it is producing its current quantity of output at the lowest possible cost. The LDR implies that, to achieve technical efficiency: a firm must balance its inputs carefully....
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This note was uploaded on 04/02/2008 for the course ECON 200 taught by Professor Cramer during the Spring '07 term at University of Arizona- Tucson.

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