Tuesday, July 31, 2012

Class XI, Principles of Economics, "Why does Law of Diminishing Returns apply to Agriculture?"

Why does Law of Diminishing Returns apply to Agriculture?

The law of diminishing returns specially applies to agriculture and other extractive industries. One thing that is common to all these industries is the supremacy of nature. It is therefore often remarked that the part that nature plays in production corresponds to diminishing returns and the part which man plays confirms to the law of increasing returns. The reason is that, nature where it is supreme is subject to diminishing returns, while industry where man is supreme, is subject to increasing return. Besides the supremacy of nature, there are several other reasons why agriculture is subject to the law of diminishing returns.The agricultural operations are spread out over a wide area, and supervision cannot be very effective. Scope for the use of specialized machinery is also very limited. Therefore economics of large scale production cannot be reaped.

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