large that it has become unwieldy to manage it, or the plant is producing to its full capacity and it is not possible further to reap the economies of large scale production, etc., etc. In figure 11.3, along OX axis are measured the units of inputs applied and along OY axis the marginal return is represented. PF is the curve representing the law of increasing returns. Compatibility of Diminishing and Increasing Returns: It is often pointed out by the classical economists that the law of diminishing returns is exclusively confined to agriculture and other extractive industries, such as mining fisheries, etc. while manufacturing industries obey the law of increasing returns. In the words of Marshall: "While the part which Nature plays in production shows a tendency to diminishing returns and the part which man plays shows a tendency to increasing returns". The modern economists differ with this view and are of the opinion that the law of diminishing returns applies both to agriculture and the industry. The only difference is that in agriculture the law of diminishing returns begins to operate at an stage and in an industry somewhere at a later stage. The law of increasing returns is also named as the Law of Diminishing Cost. When the addition to output becomes larger, as the firm adds successive units of a variable input to some fixed inputs, the per unit cost begins to decline. The tendency of the cost per unit to decline with increased application of a variable factor to fixed factors is called the Law of Diminishing Cost. Law of Constant Returns/Law of Constant Cost: The It is said to operate when with the law of constant returns also called law of constant cost. addition of successive of one factor to fixed amount of other factors, there arises a
large that it has become unwieldy to manage it, or the plant is producing to its full capacity and it is not possible further to reap the economies of large scale production, etc., etc. In figure 11.3, along OX axis are measured the units of inputs applied and along OY axis the marginal return is represented. PF is the curve representing the law of increasing returns. Compatibility of Diminishing and Increasing Returns: It is often pointed out by the classical economists that the law of diminishing returns is exclusively confined to agriculture and other extractive industries, such as mining fisheries, etc. while manufacturing industries obey the law of increasing returns. In the words of Marshall: "While the part which Nature plays in production shows a tendency to diminishing returns and the part which man plays shows a tendency to increasing returns". The modern economists differ with this view and are of the opinion that the law of diminishing returns applies both to agriculture and the industry. The only difference is that in agriculture the law of diminishing returns begins to operate at an stage and in an industry somewhere at a later stage. The law of increasing returns is also named as the Law of Diminishing Cost. When the addition to output becomes larger, as the firm adds successive units of a variable input to some fixed inputs, the per unit cost begins to decline. The tendency of the cost per unit to decline with increased application of a variable factor to fixed factors is called the Law of Diminishing Cost. Law of Constant Returns/Law of Constant Cost: The law of constant returns also called law of constant cost. It is said to operate when with the addition of successive of one factor to fixed amount of other factors, there arises a