Answer:
The law of diminishing returns is an economic law that states that at a certain point, if one factor of production is increased while the other factors of production remain constant, the additional output that is produced will decrease.
Sample case:
A farmer has 1 hectare of land and 100 units of fertilizer. In the first year, he planted rice and used 10 units of fertilizer per hectare. His harvest was 10 tons of rice.
In the second year he wanted to increase his harvest by adding the use of fertilizer. He used 20 units of fertilizer per hectare and successfully harvested 15 tons of rice.
In the third year, he used 30 units of fertilizer per hectare and successfully harvested 17 tons of rice.
In the fourth year, he used 40 units of fertilizer per hectare and successfully harvested 18 tons of rice.
From this case study we can see that the additional yield produced decreases as the use of fertilizer increases. In the first year, the additional yield was 5 tons of rice. In the second year, the additional yield was 2 tons of rice. In the third year, the additional yield was 1 ton of rice. And in the fourth year, the additional yield was only 0.5 tons of rice.
The law of diminishing returns is important for producers to understand because it can help them make optimal production decisions. Producers must consider this law when deciding how many factors of production to use to produce a product.
Some factors that can affect the law of diminishing returns are The type of factor of production which in Some factors of production such as land and capital, are easier to substitute than other factors of production, such as labor and entrepreneurship. The additional yield produced from the addition of factors of production that are easy to substitute will be more reduced than factors of production that are difficult to substitute.
then The level of technology, The higher the level of technology used, the lower the additional yield produced from the addition of factors of production.
and The quality of the factor of production The higher the quality of the factor of production used, the lower the additional yield produced from the addition of factors of production.
The law of diminishing returns applies to all types of production, both goods and services.