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Laws of Return Explain With Schedule & Diagram

Laws of Return:
There are three laws of return know to economist:
1. Law of Increasing Return 
2. Law of Diminishing Return 
3. Law of Constant Return

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Law of Increasing Return:

It is defined as:

Other things remain the same if an increase of a variable factor (labor and capital) on fixed factor (land) output will increase. This tendency in production is known as Law of Increasing Returns”

Explanation of Law by Schedule & Diagram:

Explanation of Law by Schedule


In the below diagram marginal return is measured on y-axis while units of labor and capital on X-axis. Marginal return is increasing from 1 labor to 5th labor. Marginal return curve shows increasing return because this curve is upward slopping from left to right.

Law of Increasing Return Schedule & Diagram:

Law of Constant Return:
t is defined as: 

“Other things remain the same, if an increase of variable factor on fixed factor; output will increase in the same proportion of every variable factor. Means marginal will remain unchanged”. 

Explanation of Law by Schedule: 
Explanation of Law by Schedule


In the below diagram marginal return is measured on y-axis while units of labor and capital on X-axis. As the number of labors is increased marginal return is increased but in the same proportionate, shows marginal return. 

Law of Constant Return graph

Law of Diminishing Marginal Return:

Marshall stated the law of Diminishing Marginal Returns in the following words:

“An increase in capital and labor applied in the cultivation of land causes in general less than proportionate increase in the amount of produced raised, unless it happens to coincide with an improvement the art of agriculture”.

Explanation of Law by Schedule:
Diminishing Marginal Return Schedule

From the above table we can find out that when the farmer applies first unit of capital and labor the production is 200 kg and after that he applies 2nd, 3rd, 4th, and 5th unit similarly. The 2nd column of total return is showing increasing trend as 380, 540, 680 and 800 respectively. While 3rd column of marginal return diminishing as the number of labor and capital increased.

After applying 3rd unit marginal return is decreased again from 180kg to 160kg and so on.

Law of Diminishing Marginal Return



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