(a)(i) Explain the law of diminishing returns. (ii) State how the law of diminishing returns affect agricultural production. (b) Discuss how each of the fol...

Answer Details

(a)(i) Law of diminishing returns: The law states that as successive (equal) units of a variable input are added to a fixed quantity of other inputs, the extra (marginal) output obtained from each additional unit of the variable input first rises, but after a certain point begins to fall, provided technology is held constant.

(a)(ii) How it affects agricultural production: It guides the farmer on how much of an input (such as fertilizer, labour or seed) to apply. Adding more of an input raises total yield only up to the point of diminishing returns; beyond that point each extra unit adds less to output, and eventually total output may fall, so the farmer wastes money. The most profitable level of production is therefore where the value of the extra output just equals the cost of the extra input, and the farmer should not go on adding inputs beyond this optimum.

(b) How each factor affects the supply of agricultural produce:

• (i) Price: When the price of a produce rises, farmers are encouraged to produce and offer more for sale, so supply increases; when the price falls, supply is reduced (direct relationship).
• (ii) Technology: Improved technology such as better seeds, machines and agro-chemicals raises yield per hectare and lowers the cost of production, so more is produced and supply increases.
• (iii) Weather: Favourable weather (adequate rainfall and sunshine) gives good harvests and increases supply, while drought, flood or storms reduce yields and lower supply.
• (iv) Subsidy: A subsidy reduces the cost of inputs such as fertilizer and seed to the farmer, encouraging him to produce more, so supply increases.
• (v) Government policy: Favourable policies such as guaranteed prices, provision of credit, good roads and storage encourage production and raise supply, whereas heavy taxes, bans or unfavourable policies discourage production and reduce supply.