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    Does anyone know why law of diminishing returns in the short term and what are the effects to the firms?

    thank you
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    returns diminish in the ST because fixed factors (factors of production e.g. labour, premises) gets overloaded and there less efficient, this is as if you increase production to 100 but max capacity is 80, theres less space to produce the goods, = less goods produced and marginal returns become smaller and smaller although output still increases, it increases by a smaller amount each time. that's the law of diminishing returns
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    (Original post by jennifer.tariah)
    returns diminish in the ST because fixed factors (factors of production e.g. labour, premises) gets overloaded and there less efficient, this is as if you increase production to 100 but max capacity is 80, theres less space to produce the goods, = less goods produced and marginal returns become smaller and smaller although output still increases, it increases by a smaller amount each time. that's the law of diminishing returns
    Thank you
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    no problem. sorry it was so late.
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    (Original post by anaa26)
    Does anyone know why law of diminishing returns in the short term and what are the effects to the firms?

    thank you
    I think:
    It's only in the short run because you can't change fixed costs whereas in the long run you can (long run all costs variable) eg a farmer producing apples in short run can't get all apples because too high up trees and may need equipment which is expensive whereas in the long run he can plant more trees
    Only effects I can think of are higher costs of production and more inefficiency
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    Where can I get some good revision notes on monopolistic competition from please?
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    (Original post by Katiejt)
    Where can I get some good revision notes on monopolistic competition from please?
    FYI If you're on AQA then Monopolistic competition is not on the syllabus. If you're not on AQA (or want to learn about it anyway) there are some good Youtube videos like Econplusdal's video on monopolistic competition.
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    (Original post by NikolaT)
    FYI If you're on AQA then Monopolistic competition is not on the syllabus. If you're not on AQA (or want to learn about it anyway) there are some good Youtube videos like Econplusdal's video on monopolistic competition.
    Unfortunately I'm on edexcel! Ok that's great thanks will check it out 😊
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    Is there any good notes on market forces for AQA? It seems to come up every year but there isn't much about it in textbooks.
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    (Original post by Katiejt)
    Unfortunately I'm on edexcel! Ok that's great thanks will check it out 😊
    In that case, maybe someone in the Edexcel's Unit 3 thread could help you out: http://www.thestudentroom.co.uk/show....php?t=3154347

    A lot of good discussion and Q&A happening for AQA ECON3 in this thread: http://www.thestudentroom.co.uk/show....php?t=3161403
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    In the short run at least one factor of production is fixed, a firm cannot change its scale of output in the short run. In the short run if a firm wants to produce more it must shift it's supply and use up more of its limited factors of production, so the firm increases a variable factor of production such as labour, to fixed factors of production like land and capital.

    In theory when they increase the number of workers, marginal product will at first rise due to benefits that arise from SPECIALISATION and the DIVISION OF LABOUR, this means that each worker you employ will increase total output to more than the previous one. After a while marginal product (the gain in product for every new worker you employ) will start to decrease until the point in which it becomes negative, this is when the law of diminishing returns kicks in.

    Basically each new worker you are employing once the law of diminishing returns kicks in will produce less than the last, this can be explained by things like a lack of capital equipment avaliable for the amount of workers, hence the term 'too many cooks spoil the broth.'

    It can be shown by the average cost diagram, the shape of the average variable or marginal cost curves explain it, as the curves start to go upwards, this is the increase in costs from employing more workers matched with the lower marginal product each new worker has.
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    economics help
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    (Original post by Amanath)
    economics help
    With?
 
 
 
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