Law Of Diminishing Returns Case Study
Anne Robert Jacques Turgot contributed an important economics idea which is the law of diminishing returns. In the Observations sur le mémoire de M. De Saint-Péravy which is written in 1767 by Turgot, mentioned about the law. Law of diminishing returns can be defined as the property whereby the benefit from an extra unit of an input declines as the quantity of the input increases (Mankiw, 2013). In other words, when workers already have a large quantity of capital to use in producing goods and services, giving them an additional unit of capital increases their productivity only slightly. This law is stated earlier in physiocratic school by Turgot than Thomas Malthus and David Ricardo.
Next, Turgot also said that capital is essential and necessary for the economic growth. Turgot believed that people are not going to spend or consume all of the outputs that their produced is the only way to accumulate the capital. After the landlords paying the materials and labour costs, the capital …show more content…
He figured out the details of mercantilist regulation in the industry was not simply intellectual error but the state granted a genuine system or forced on cartelization (an association of suppliers that keep prices high) and special benefits. The huge mutual benefits of free exchange are equals to freedom of trade in domestically or internationally.. He made a vital pre-Hayekian point about the uses of particular knowledge that can be replaced by households and firms in the free competition market structure. Turgot also noted that the main mover of the process is self interest. In a free competitive market, an individual has the interest must be similar with the general interest. For example, a household purchases the goods and services that produced by the firms and offer them the cheapest price and fulfill their highest utility. Firms also will sell their best quality of outputs at the maximum or highest
Next, Turgot also said that capital is essential and necessary for the economic growth. Turgot believed that people are not going to spend or consume all of the outputs that their produced is the only way to accumulate the capital. After the landlords paying the materials and labour costs, the capital …show more content…
He figured out the details of mercantilist regulation in the industry was not simply intellectual error but the state granted a genuine system or forced on cartelization (an association of suppliers that keep prices high) and special benefits. The huge mutual benefits of free exchange are equals to freedom of trade in domestically or internationally.. He made a vital pre-Hayekian point about the uses of particular knowledge that can be replaced by households and firms in the free competition market structure. Turgot also noted that the main mover of the process is self interest. In a free competitive market, an individual has the interest must be similar with the general interest. For example, a household purchases the goods and services that produced by the firms and offer them the cheapest price and fulfill their highest utility. Firms also will sell their best quality of outputs at the maximum or highest