Alternative value and law of decreasing return. Changing the volume and costs of production in the short term. The law of decreasing return. Limit and medium product the law of reducing limit return

Production factors should be used by the firm in compliance with certain proportionality between permanent and variable factors. It is impossible to arbitrarily increase the number of variable factors per unit of constant factor, since in this case it comes into effect law of decreasing return (See 2.3).

In accordance with this law, a continuous increase in the use of one variable resource, in combination with the constant number of other resources at a certain stage, will lead to the cessation of recoil growth, and then to its decrease. Often, the law implies the immutability of the technological level of production, and therefore the transition to more progressive technology can increase returns regardless of the ratio of permanent and variable factors.

Consider in more detail how the return on the variable factor (resource) changes in the short-term interval when part of the resources or factors of production remains constant. After all, for a short period, as already noted, the firm cannot change the scale of production, build new goals, buy new equipment, etc.

Suppose that the firm uses only one variable resource in its activities - work, which is performance. How will the costs of the company be changed with a gradual increase in the number of employed workers? First, we consider how the production of products will change with increasing the number of workers. As the equipment loads, the production is rapidly growing, then the increase is gradually slowed down until the workers become enough to fully load equipment. If you continue to hire workers, they will not be able to add anything to the volume of products. In the end, workers will become so much that they will interfere with each other, and the release will be reduced.

See also:

2 Law of decreasing return.

Interchangeability of production factors provides a producer production choice. However, in the real life of a particular entrepreneur more interested in the question of which will be the output of production if the process of production will involve an additional amount of resources. Imagine the Minsk Kamlivol Plant, where one tipples serves 10 machines on technology. You can increase the number of machines, leaving the former weaver. Of course, an increase in machinery will lead to an increase in production. But Tkachkha will not be able to serve 15 machines as well as efficiently, as 10, and 20 - just like 15. Therefore, despite the overall increase in the volume of products, the increase in the production of goods from the use of each subsequent machine, with a constant number of weaving, will be less than from the previous one.

You can imagine the opposite situation: without increasing the number of machines, make more weaves to work. Then every female worker will serve a smaller number of equipment, and the machines will work better. But the performance of the equipment is limited, so the production of weaving will decrease.

Thus, at a certain NTP level, an increase in the investment into the production of one type of resource with a constant number of others leads to a decreasing return on this resource or, starting from a certain time, the sequential connection of the variable resource units to the constant fixed resource gives a decreasing increase in this resource.

The law of decreasing return acts in the presence of certain conditions.

1 First, all units of variable factor are homogeneous. In relation to work, for example, this will mean that each additional workman has the same mental abilities, qualifications, skills, coordination of movements, education, labor skills, etc., as well as taken earlier.

2 Secondly, the law involves the constancy of the technical and technological level. If technical progress occurs, there will be a progressive shift of the cumulative product curve towards growth.

Third Third, the law assumes the immutability of at least one production factor.

Consider the action of the law of decreasing return on a specific example.

Law of decreasing return

Variable factor, l Tr. MR AR

Constant

factor, capital
0 0 - - 20
1 10 10 10 20
2 25 15 12,5 20
3 37 12 12,3 20
4 47 10 11,75 20
5 5 8 11 20
6 60 5 10 20
7 63 3 9 20
8 63 0 7,875 20
9 62 -1 6,89 20

This hypothetical material can be used to build appropriate curves.


3 Production. Cumulative (general), medium and limit product.

The general, or cumulative, product (TR) of the variable factor represents the total amount of products manufactured in kind, which increases as the use of one variable resource increases with other continued conditions.

If the overall (cumulative) product is divided into the amount of variable factor used in the production of the variable, such as labor (L) or capital (K), we obtain an indicator of the average product (AR):

AR L \u003d TR / L

where the AR is the average product of the variable factor;

K - variable resource (capital) or L - variable resource (work).

The limit product (MR) is an additional output of products that will be achieved by increasing the use of an alternating resource with a constant number of other resources:

MR \u003d DTP / DK or MP \u003d DTP / DL

where MR is a maximum product of capital or labor;

DTP is a change in the total production volume corresponding to the change in DC or DL \u200b\u200bof the units of the used capital or labor with the unchanged number of other factors.

The total product curve passes three phases. First of all, it rises with accelerating pace; Then its growth occurs at a slow motion; Finally reaches the maximum and begins to decline. The curve of the limit product reflects the specifics of the movement of the aggregate product. The fact is that the limit product is the angle of inclination of the total product curve. Speaking otherwise, the limit product measures the change in the overall product associated with the addition of an additional worker. Accordingly, all phases of the population of the aggregate product are reflected in the dynamics of the limit. As long as the cumulative product grows accelerated tempo, the limit product increases.

The growth phase of the cumulative product is slowed down by a drop in the limit product, which retains a positive value. The limit product goes into a negative plane when the cumulative reaches its maximum.

The average and limit product is also characterized by a certain dependence. As long as the limit product exceeds the middle, the latter increases. If the limit product is less than average, the last falls. The intersection of these two curves determines the maximum meaning of the average product.

Thus, production can be divided into the following stages.

Stage 1. Related to the beginning of production, when the number of labor resources is 0, and continues until the moment when the utmost product is equal to each other, and the latter reaches its maximum value.

Stage 2. Begins at the moment when the average product has the highest value, and continues until the limit product becomes equal to zero.

Stage 3. The limit product becomes negative, the total starts to decline.

In the first stage, in a certain sense, there is a resource overrun, since the manufacturer carries the cost of equipment, which does not have enough employees to use. The company could produce the same production volume with smaller amounts of capital and the same amount of labor as excess capacity is available. However, since the amount of capital is accepted as a constant, it is not possible to use it in smaller sizes.

Similarly, in the third stage, a large amount of labor is used in relation to capital. The limit product of labor becomes negative, as employees prevent each other, manufacturers are forced to pay all hours of labor, which rather leads to a decrease than to increase production volume. This takes place in the first stage, when the equipment is paid, which is not used due to the lack of labor resource.

For the organizers of production it would be desirable to avoid the first and third stages and stay on the second. Only in this case there is no excess of efficiently used labor and capital; There is no need to pay for unused production factors.

Additional money income, which brings the sale of limit product, is an income from the limit product.

It should be emphasized that the indicators of medium and limiting products are characterized by the average and limiting performance of the variable resource. For example, if the variable resource is labor, then the average product of labor expresses the productivity of the "average" worker, and the limit - the labor productivity of each additional worker used in production

The essence of the law of decreasing productivity of production factors is that with an increase in the use of one resource, while others remain unchanged, the limiting product of the variable factor will decrease. In other words, an increase in production volume is limited if only one factor changes. In this regard, the equality of two indicators - the limit and average return of production factors. Excess medium recoil over the limit signal to the fact that the effective expansion of production by increasing the use of only the factor is not further. Changes in the entire set of factors used are required.

The justice of the law of decreasing productivity of production factors is easy to illustrate on specific examples. Otherwise, for example, due to the involvement of additional workers in agriculture, it would be possible to feed the population of the globe with 1 hectare of fertile land.

The theory of limit performance is used only under the condition of the interchangeability of production factors. If there is no such interchangeability, it is impossible to distinguish the limit product obtained by changing the same factor, from the limit product obtained by changing other factors. In this case, the additional investment of one of the factors of production in the immutability of others only leads to the ineffective use of this resource without any impact on the volume of products.

Send your good work in the knowledge base is simple. Use the form below

Students, graduate students, young scientists who use the knowledge base in their studies and work will be very grateful to you.

  • 1 .
  • 2 .
  • 3 . Tests
  • 4 . Z.adach
  • L.itera

1 . The law of decreasing return. Curves of the cumulative, medium and limiting product (analytical and graphic interpretation)

The essence of the law of decreasing return is that additional costs give an increasing amount of additional products. The law expresses the ratio between the costs and the results of these costs. However, it should be borne in mind that the law of decreasing return is valid with a change in one factor of production and the rest of the rest. For example, income will change when engaging in the process of producing an additional number of employees. Moreover, the additional amount of products obtained from an additional unit of labor will decrease. But this is the immutability of other factors (equipment, technologies).

At the same time, if at the same time a large number of all resources is involved in the production process (labor - the population has grown, new lands, progressive technologies, etc.), the return will increase. Rotation growth occurs on the basis of increasing production.

The maximum magnitude of the physical volume of the product produced by a certain value of the variable factor with a constant technological process is a common (gross or cumulative) TP product (Total Product). If we assume that the variable factor is the working force (L), and the permanent capital (K), then the increase in the overall product product will be under the influence of the labor force further attracted to the labor process. Economy / Ed. A.I. Arkhipova, A.N. Nesterenko, A.K. Bolshakova. - M: Prospekt, 2002. - P. 112.

The total product calculated on the unit of the variable factor used in production is the average product of the AR (Average Product).

AR \u003d TR / L \u003d Q / L.

The average product measures the performance of the variable factor. If a variable factor is the workforce, then the value of the average product is labor productivity.

The change in the total product as a result of a change in the unit of the variable factor used in production, expresses the limit product of MR (Marginal Product). The limit product measures the performance of the additive unit of the variable factor. If a workforce acts as a variable factor, the performance of an additional factor is called the limiting productivity. The limit product expresses a change in a common product (DQ) by infinitely small increments of the variable factor (DL). In this way,

MRL \u003d DQ / DL, or Q / L.

The law of decreasing limit performance shows that: from a certain period of time, an increase in the use of one resource with a constant volume of another leads to a decrease in the limiting product of the variable factor.

The liabilities of the substitution of production factors is that the ratio of the growth of two resources is in the opposite dependence on the magnitude of their limit products.

Production factors are divided into variables and constant. The variables include labor, raw materials, fuel, electricity, etc. The number of these factors firm can easily change (for example, hire additional workers, more economically use raw materials and fuel).

Constant factors include buildings, severe specialized equipment. In order to change these factors, a long period of time required by the firm is required to change the volume of all production factors used. In the long period of time, all production factors become variables. Therefore, the concept of "constant factors" is characteristic only for a short period.

If the firm reduces or increases production over a short period of time, the change in the volume of production will not be proportional to changes in the number of variable factors. For example, in a short period, the land and capital in agriculture are permanent factors. During the autumn season, the farmer collects a crop from a plot of land, snowdown by a certain agricultural culture in the spring, that is, the magnitude of the agricultural plot cannot be changed. Agricultural buildings and inventory remain constant. However, the farmer can, with a good crop, hire additional workers. The most important thing is that even if all employees work with the same efficiency, each additional employee will add an unequal amount of products to a general issue. The productivity of labor, measured by the average product, as the number of workers increase, at the beginning increases, then reaches the maximum and, finally, the moment occurs when the average volume of production begins to decrease.

The performance dynamics is determined by the ratio between permanent and variable factors. With a low level of loading of permanent factors, an additionally hired employee provides a significant increase in the total volume of products.

Further attraction of additional workers leads to the fact that the constant amount of land and capital is not enough for all employees working with complete returns. With an increase in the number of employees, the total volume of production may increase, but the development of one employee will gradually decrease.

There is a certain dependence between the limit and medium-sized products. The average product is calculated by dividing a common product to the number of workers. If you present the cumulative, medium and limit products graphically (Fig. 1.1), then you can see, the line of the limit product crosses the middle product line at the maximum point of the latter. When the limiting product curve is located above the medium-sized curve, the average product increases. If the limiting curve is located below the medium-sized curve, then the average product decreases. Nureev R.M. Course microeconomics. - M.: Norm-Infra-M, 2004. - P. 226.

At the same time, the magnitude of the limiting product is depending on the change in the common product.

Figure 1.1 - General, medium and limiting variable resource products (L) (fictional values)

Thus, this magnitude depend on each other. Similarly, one can consider this value depending on other factors of production.

2 . The rate of loan interest, its types and role. Factors affecting interest rate

Capital is a resource that has a long service life and used to produce more economic benefits. Entrepreneur, acquiring capital goods (machines, machines, etc.), should relate to their purchase and exploitation with the expected income from their application. Semenihina V.A. Microeconomics. - Novosibirsk: Siberian Institute of Finance and Banking, 2003. - P. 215.

The demand for capital services is a demand for free funds in which a company needs to update or acquire capital equipment. Cash is used by the entrepreneur in the investment process.

There are two ways to determine the profitability of the investment: with the help of discounting, comparing the price of the DP demand, equal to the current discounted PV cost, with the price of SP capital offer, or by comparing the expected level of income into capital p "with the interest rate R.

The company receives maximum profits, provided that the income and limit costs per unit of capital are equal, i.e. Mrpk \u003d Mrck.

The maximum income of capital is depending on the maximum income of the MRK capital unit and an additional unit of MPK products obtained as a result of using the Capital Unit: MRPK \u003d MRK.

In the context of perfect competition, the interest rate is formed on the market, none of the creditors or borrowers can affect its magnitude. The interest rate balances the demand and supply of savings, as well as limit capital costs (MRCK \u003d I).

Equilibrium in the capital market is as follows (Fig. 2.1).

In the specified figure:

S is a curve of cash supply curve;

Di - investment demand curve;

re is the equilibrium interest rate;

QE is the equilibrium value of investments and savings.

Figure 2.1 - Capital Market

If the entrepreneur takes doubt, he necessarily compares the losses that it will suffer due to the payment of interest, and the benefit that the acquisition of capital is.

The source of borrowed funds serve as savings. Economic practice indicates that people who carry out savings, firstly, compare the current consumption with the future, and, secondly, compare the most effective ways of distribution of savings. The main role in this distribution is played by the magnitude of the percentage.

The interest rate is the price paid by the owners of capital for the use of funds occupied for a certain period. Despite the fact that in the total amount of factor income of the population, this percentage is insignificant, many people have deposits in banks and receive income from this. Kurakov L.P. Economic theory. - M.: Press service, 2000. - p. 56.

For a subject of demand for capital, the percentage acts as costs for the subject of capital supply - as an income. The bid of the loan interest depends on the demand and supply of borrowed funds, in real reality there is a wide range of rates. When making investment solutions, no nominal interest rate is taken into account (at current prices), and the real (purified inflation). Those. The real rate of interest RR is the nominal RN rate minus inflation level I. RR \u003d Rn - i. These are types of interest rates.

The interest rate is defined as the ratio of the amount of the percentage to the magnitude of the loan capital. If the loan is provided for several years and without the condition of the annual interest payment, then the total amount at the time of return of the loan is determined by the formula for calculating a complex percentage. For example, in January 2006, a loan is provided for 5,000 rubles. For five years, 25% per annum is normal. Under these conditions, the total amount of capital by January 1, 2011 will be: 5000 (1 + 0.25) 5 \u003d 15000 rubles.

In this case, the nominal rate of the loan interest is used, i.e. excluding inflation.

Banks are most often advocated as intermediaries when moving loan capital. In this regard, depository and loan interest rates should be distinguished.

Depository interest rates are used when accrued and paying interest on deposits to the bank. Accrued amounts receive depositors.

Loan interest rates are a regulatory fee for using a bank loan. The magnitude of the rate of this percent depends on the degree of risk, urgency (increases with an increase in the period), the size of the loan.

The factors on which the loan interest rate depends is presented in Figure 2.2.

Figure 2.2 - Factors affecting a loan interest rate

Wanting to maximize profits, each entrepreneur chooses such a project that provides the rate of profit more than the market loan interest rate. Accordingly, the owners of capital are more willing to refuse the current consumption, the higher the depositary interest rate. Thus, the market interest rate performs an essential role in regulating economic processes. Through the market rate, the use of limited monetary resources occurs. They are directed to the most effective, income generating industry. At the same time, the market rate stimulates the savings of people, contributes to investment, without which it is impossible to establish large-scale production and receive stable profits. McConnell K.R., Bruz S.L. Economics: principles, problems and politics. Per. from English - M.: Infra-M, 1999. - P. 337.

Important in determining the effectiveness of investment has such a tool as discounting.

Discounting is the procedure for calculating today's summary value that can be obtained in the future at the existing interest rate. Discounting allows you to compare the value of today's costs and future income. If the discounted cost of the expected net income exceeds the costs of investments, the company decides to invest. When using the second method, the firm will invest if the expected level of capital income is not lower or equal to the interest rate.

To make a decision on investing on the basis of an indicator of net discounted cost, the discounted cost of expected income, which is compared with investments. From here, if the indicator of the net discounted value is greater than zero, then the investment can be produced. The resulting profit with a positive indicator of the net discounted cost exceeds the volume of investments.

Thus, firms always compare the costs with the results, as their main goal has profits.

3 . Tests

1. Alternative costs:

a) include explicit and implicit costs, including normal profits;

b) include explicit costs, but do not include implicit;

c) include implicit costs, but do not include explicit;

d) do not include applied or implicit;

e) exceed explicit and implicit costs per magnitude of normal profits.

Alternative costs - the costs of missed capabilities, so they are implicit costs.

2. The curve of the proposal of the competitive seller in the short term is:

a) curve of limit costs;

b) product price line;

c) the declining part of the average cost curve;

d) the increasing part of the average cost curve;

e) part of the limit cost curve, located above the average variable costs.

The proposal curve of the competitive seller graphically coincides with the curve of limit costs in the upstream area, i.e. Above average variable costs.

4 . A task

Suppose the monopolist can sell 10 units. Goods for $ 100 per unit, but selling 11 units. Causes price reduction up to $ 99.5. What is the maximum income, with an increase in sales from 10 to 11 units?

Extreme income is calculated according to the following formula:

where Mr is the income;

Tr - income income;

Q is the increase in the number of sold goods.

We get:

Mr \u003d (1199.5 - 10100) / (11 - 10) \u003d 94.5 dollars.

Answer: $ 94.5.

Literature

1. Kurakov L.P. Economic theory. - M.: Press service, 2000. - 498 p.

2. McConnell K.R., Blind S.L. Economics: principles, problems and politics. Per. from English - M.: Infra-M, 1999. - 665 p.

3. Nureev R.M. Course microeconomics. - M.: Norma Infra-M, 2004. - 542 p.

4. Semenihina V.A. Microeconomics. - Novosibirsk: Siberian Institute of Finance and Banking, 2003. - 235 p.

5. Economy / Ed. A.I. Arkhipova, A.N. Nesterenko, A.K. Bolshakova. - M: Prospekt, 2002. - 250 s.

Similar documents

    Determination of concepts and methods for calculating cumulative (gross), permanent (fixed) and variable costs; Their role with macroeconomic analysis analysis. Calculation of cumulative, medium and limiting products. The content of the law of decreasing return.

    examination, added 10.06.2014

    Study of the concept of production costs, their classification. Characteristics of the cumulative, middle and limiting product. Study of the law of decreasing return. Calculation of permanent, variable, limit, medium total and average permanent production costs.

    coursework, added 03/27/2014

    The market as not only a new form of economic relations, new links in production, but also new economic consciousness, thinking and psychology. General characteristics of the law of decreasing return, familiarity with the functions. Analysis of the dynamics of production costs.

    examination, added 01.12.2013

    Demand and supply, as the fundamental categories of economic theory in general and microeconomics in particular. Costs of the company. The essence of the cumulative, medium and limit product, its dependence on production costs. The law of decreasing return.

    examination, added 01.03.2017

    The law of decreasing utmost utility. The magnitude of the total utility. Products that are not subject to the law of decreasing utmost utility. The amount of consumption affecting the action or invalidity of the law. Confirmation of the law.

    essay, added 01/26/2007

    Change prices for good and budget restriction. Graphic interpretation of the Slutsky Hicks Theorem. The law of decreasing performance. Maximization of profits in a completely competitive market. Theory of production and costs. Labor and capital markets.

    course of lectures, added 22.02.2011

    Production costs, their types. Limit costs. The law of a decreasing limit return. Equilibrium firms in the short and long term. Study of costs in the manufacturing process. Profit. Maximizing profits. Breakeven point.

    course work, added 05.11.2008

    Economic teachings of the Ancient East and India. Marginalism as an economic school. Economic doctrine L. Valras. The essence of the concept of economics offers. The interpretation of the Laffer curve as a special case of the law of decreasing returns of production factors.

    examination, added 08/13/2013

    The problem of choice and evaluation of alternative costs. Analysis of supply and demand. The law of decreasing return and evaluation of implicit costs. Analysis of the competitive environment of the company. Analysis of aggregate demand factors and a cumulative supply in the Russian economy.

    examination, added 20.08.2007

    Production function (isoquered). The law of decreasing return. Production. Cumulative (general), medium and limit product. The concept of costs, their classification. Permanent, variables and total costs. Curves costs. Medium, limit costs.

Cumulative offer in the labor market

In the conditions of perfect competition, the company is not able to influence the price of its products, so it can get more profits only by reducing costs. Consequently, the first important task of the company is to search for such a combination of production factors, which will allow the cost of minimizing the costs. This task is similar to the choice of consumer, and similar tools are used to solve it.

Experience shows that there is a direct relationship between the volume of products and the amount of production factors used. At the same time, production factors are used in a certain combination that technology dictates. The dependence between any combination of production factors and the maximum possible production for it is expressed in production function(1.1):

Q \u003d F (F 1, F 2, F 3 ... F n), (1.1)

where q is the maximum release with this technology and a combination of factors;

F 1 ... Fn - production factors.

For each type of production there is its own production function. However, they all have a number of common properties:

- If we assume that the costs of any one factor increase, and all other factors do not change, then a gradual decrease in the growth of products caused by the expansion of the use of this factor can be traced. This trend got a name law of decreasing return A variable factor of production.

Distinguish between the general, medium and limit product of the variable factor production . Common product - this is the amount of products, the release of which is due to a certain value of this factor, provided that all other factors of production do not change . Middle Product - This is released per unit of factor (for example, labor productivity). Farm product - This is an increase in a common product caused by the use of one additional unit of an alternating factor.

Production factors are characterized by interchangeability and complementarity. Any product can be made by using various factors in a variety of combinations.

It is important to distinguish short-term and long-term periods of the company. This difference is based on no time spending, but the ability or inability to resize all the factors used. In the short term, some factors of production are constant, i.e. Their use cannot be expanded. Another part of factors is variable factors whose size changes together with a change in the volume of release.

In the long term, all factors of production are variables. If they change in the same proportion, there is a change in production, and the law of decreasing return does not work. There are positive, negative and constant scales effect. The positive effect of scale means that the production volume increases faster costs, and negative is slower. With a constant effect of scale, the release grows at constant costs.


If we assume that only two production factor is used - labor and capital, the production function will take the form (1.2):

Q \u003d F (k, L), (1.2)

where q is a production function;

f (k) - work;

f (L) - Capital.

Her graphic image is isokvanta (permanent amount line). This is a curve, each point of which is a combination of labor and capital, providing a certain amount of product (see Fig. 1.1).

Law of decreasing return

The action of the law of decreasing return was not taken into account in the pre-maintenance period of the functioning of the domestic economy. One of the main directions of increasing production efficiency was considered its concentration. The construction of the largest enterprises was a characteristic feature for all sectors of the economy.

The law of decreasing return (Law of Diminishing Returns), or the law of a decreasing limit product, or the law of changing proportions, is all different names of one law. Consider two definitions, under a different angle of view, explaining the law of decreasing return.

Marginal - close to the limit on the edge. In Russian, the most accurate sense expresses the words "added", "additional".

Law of decreasing return Person: as the use of any production factor increases (with fixed other production factors), as a result, a point is achieved in which the additional use of this factor leads to a decrease in production volume.

Starting from a certain moment, the consistent connection of the united resource units (such as labor) to a constant, fixed resource (for example, capital or land) gives a decreasing additional, or limit, product per each subsequent unit of variable resource. In other words, if the number of employees serving this activity will increase, the growth of production will occur after a certain moment more slowly, as the number of workers in production increases.

In fact, if you, not engage in the cultivation of the Earth, get a crop equal to 8 buckets (80 kg) from one weave, then after one processing of the Earth (weeding, watering, enclosure) the crop will be 94 kg, after two treatments - 102 kg, after three - 105 kg. It is clear that the returns of each subsequent processing with equal cumulative costs of living and extractable labor will decrease.

This law is fair on not only agricultural production, but also other industries. What happens if the number of workers increases, say, up to 20 people?

Additional, or limit, the product of additional workers will be reduced. In this case, we assume that each additional workman is equivalent to the main worker both from the point of view of individual productivity and in terms of qualifications. The limit product begins to decrease because a larger number of workers are busy with the same magnitude of capital funds.

Consider an example.

Table 1. Illustration of the law of decreasing return: a change in production volumes, depending on the change in variable resources

Investments of variables of labor resources (number of workers) at fixed power equipment

Total production (units of products)

Limit return (difference of the values \u200b\u200bof the subsequent and previous lines)

Average product

Increasing

Descending

Negative

Table 1 shows a visual numerical illustration of the law of decreasing return. The total amount of products is shown, which can be obtained as a result of the connection of one or another number of labor resources with constant resources (the magnitude of the latter is assumed unchanged). The following column reflects the limit performance - shows a change in the volume of production associated with the attachment of each additional unit of labor resource. Please note that in the absence of labor costs, the production volume is zero (the enterprise without people cannot give products). The appearance of the first three workers is accompanied by a growing return, since their limit products are 8, 12 and 16 units, respectively. However, in the future, starting from the fourth worker, the limit product (the increase in total production) consistently decreases, so that it comes down to zero for the ninth worker, and for the tenth - the twelfth has a negative value. The average performance (or production volume per worker, also called labor productivity) is shown in the right column.

For clarity, we give a graphic image of the dependency dependency. Three phases are clearly visible on the second figure: 1) the total production increases with accelerating pace; 2) the pace of elevation slows down; 3) The return is reduced.

Fig. 1. The law of decreasing return.

Fig. 2. Limit and average performance

(1 - average performance, 2 - limit performance).

 

Perhaps it will be useful to read: