Question

Explain the principle of the cost of production, Diminishing Marginal Productivity , Diminishing Marginal Utility in microeconomics. ( minimum a paragraph for each)

Answer 1

Answer-

1] Principle of cost of production -

Cost of production includes amount of money required to produce required quantity of output. In total cost of production, some costs are fixed in nature like capital, technology etc. are fixed which don't change in short run. Therefore these are known as fixed costs. Labour, raw material etc. are changing factors in production process according to the requirement of production. Therefore these are known as variable costs. Other types of cost includes opportunity cost, marginal cost, implicit and explicit cost etc.

2]  Diminishing marginal productivity -

It is practice suggesting that when additional inputs are used in production process, quantity of output will also be increased. Initially rate of increase in output is more but after a certain point of time, this increase in output will be at a diminishing rate. It means that if there will be an increase in output because of additional inputs, return from additional input will reduce gradually, indicating a decrease in productivity. Thus it is called as diminishing marginal productivity.

3] Diminishing Marginal Utility-

The law of Diminishing Marginal Utility states that the utility derived from a commodity by a consumer decreses as consumers consumes excess units of a commodity.

In short, at initial level the supply of a commodity is limited and utility for a commodity is more by a consumer but after a certain point when the supply of commodity increases, consumer consumes more units and if the consumer's utility for additional units though increase, it will be at a decreasing rate. Therefore it is called as diminishing marginal utility.