Question

What is meant by decreasing returns to a factor?

Answer 1

Decreasing returns to a factor states that after reaching a certain capacity of utilisation, any increase in the factor of production will result in rise of the cost per unit of the additional output and the returns will not be proportionate.

Also read:

• Returns to Scale
• The Law of Diminishing Marginal Product and the Law of Variable Proportions
• Price Elasticity of Supply
• Elasticity of Demand

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