Routledge Dictionary of Economics, Second Edition
diminishing returns law (D2)
The decline in output which occurs as successive units of a variable factor of production are applied to a fixed factor. The most familiar example was the application of increasing amounts of labour to a fixed amount of land with the consequence that the MARGINAL PRODUCT of labour declined.
This view of agricultural production was central to much of CLASSICAL ECONOMICS, including RICARDO’S model of the economy. The US economist Henry Charles Carey (1793–1879) was one of the few economic writers of the nineteenth century to argue that in a developing economy cultivation can proceed from the least to the most fertile land bringing about increasing returns.
See also: returns to scale
References
Carey, H.C. (1848) The Past, The Present and The Future, Philadelphia: Carey & Hart.
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