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汉语拼音 CHINA GREAT WALL OF LAW DIMINISHING RETURNS AND ECONOMIES OF SCALE

By Felipe Argote

David Ricardo

David Ricardo, an economist from the economic mainstream representative called classic born in the eighteenth century and died in nineteenth century who wrote the book "Principles of Political Economy and Taxation" is the ideologue of the "Law of Diminishing Returns." According to this analysis, based on Ricardo said agricultural production in a production process if we increase one input while the others remain constant, although it will achieve an increase in total output per unit of additional input, the variation in growth with each unit increase of the input, or is the marginal product is declining. Understand how the marginal product of variation in the total amount of product from an increase in their input while the others remain constant.

Although confirmed in several empirical studies also have been exceptions. The variation in the increase in production or product will have features the top marginal increasing until it reaches its turning point and then the marginal product begins to be decreasing.

For example, if we have to move 960 blocks from one place to another and only hired a laborer to move may take you an entire workday, but if we hired eight pawns may be coordinated to be in a row and probably will in half an hour. Then if we hired 16 laborers is likely to do so in twenty minutes. We see that initially the movement speed with a single pawn was 120 h-pawn block. Then with 8 pawns was 240 per hour with an increase of 200% but then the workers double the increase was 150%. By doubling the pawns first Once the increase was significant but the second time though was done in less time, the marginal product was lower. This is because on the second occasion was too much for the transmission line and rather hindered.

Alfred Marshall

Also if hired laborers to produce tomatoes, suddenly if we double the production tripled day laborers, but if you go back to double production only is doubled. The total product may be higher but the marginal product will be lower. If we insist on doubling our income laborers come down because although more product we have to pay more laborers per unit produced.

This is the law of diminishing returns and serves in a practical way to locate how far we go designating inputs while increasing yields are rising, and when to stop allocating new resources to not make the Erros of thinking is right only because doing so increased our total product without taking into account that the allocation of more units reduce our marginal product and hence the end of the period will reduce our income.

This element also is convenient for us to apply the concept Economies of Scale. While there are increasing returns or as the cost of producing an additional unit of product is reduced with the increase of production economies of scale.

This concept was developed by the neoclassical economist Alfred Marshall who took items from the marginalist school and developed by David Ricardo set out to form the so-called neoclassical school of economics.

Marshall divided the internal economies of scale calls, which occur when a company reduces unit costs as production increases total and external that occur when a sector industry expands in a manner that determine a reduction in the cost of all industrial companies. This may be the effect of improved road infrastructure for example.