Question

Explain two causes of negative returns to a variable factor.

Answer 1

1. Overcrowding of variable factor:
   1. When too many workers are employed relative to the fixed inputs (e.g. limited land or machinery), they begin to interfere with each other.
   2. There is not enough equipment or space for all to work efficiently.
   3. This leads to confusion, inefficiency and waste, causing total output to fall.
2. Limited fixed resource:
   1. Fixed factors become fully utilized or over-utilized.
   2. Additional variable inputs have no productive role, so their contribution turns counterproductive.
   3. Example: If a small shop has 3 counters but employs 10 workers, the extra workers may disrupt rather than help the work process.