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WAEC SSCE - Economics - 1994 (Objective)

Question 1 Report

If successive unit of labour are added to a piece of land while capital and technology remains constant, a point will be reached in the level of production when each additional unit of labour will add less to the output than previous units. This concept is known as
Answer Details
The concept being described is known as the "law of diminishing returns" or the "law of diminishing returns of a variable factor". This law states that if the input of one factor of production (such as labor) is increased while keeping all other inputs constant (such as capital and technology), there comes a point beyond which the marginal product of that factor will start to decrease. In other words, each additional unit of labor will add less to the total output than the previous unit. This is due to factors such as limited space, lack of resources, or the inability of the other factors to complement the added labor. This concept is important in determining the optimal level of production for a business or industry.
Read lesson note on The Theory Of Production (JAMB)
Read lesson note on Theory Of Costs (JAMB)
Read lesson note on The Theory Of Price Determination (JAMB)
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