Question

Explain the reflection on total output if a single factor of production is increased continuously, keeping other factors same.

Answer 1

If a single factor of production (say, labor) is increased continuously, considering other factors constant, then the reflection on total output will be as follows:

1. Increasing returns to the variable factor initially, output will increase at an increasing pace.
2. The second stage will see a constant rate of rise in total output, also referred to as constant returns to the variable factor.
3. The third stage will see a diminishing rate of increase in overall production, referred to as diminishing returns to the variable component.
4. The total production eventually reaches its maximum and then begins to decline, a phenomenon known as negative returns to the variable component.