Additional production factors lead to smaller output increases after optimal capacity. Also known as diminishing marginal utility or variable proportions law. Not necessarily negative, but often results in decreased per-unit returns
Factors of production are resources used to produce goods and services for profit. Land includes natural resources, labor is human effort, capital is manmade resources. Enterprise combines all four factors to carry out production process. Factors can be complementary or substitute for each other
Productivity measures output per unit of input in production. Output refers to total production, inputs include land, labor, capital. Higher productivity means producing more with given inputs
Capital goods are durable produced inputs used in production of goods and services. Capital is one of three primary factors of production alongside land and labor. Capital goods are tangible property and can be increased through production
Four basic factors: land, labor, capital, and entrepreneurship. Classical economists focused on physical resources and value distribution. Smith and Ricardo defined factors as land, labor, and capital stock. Marx added labor power as a separate factor
Two factors of production (K and L) are mobile across sectors. Two sectors: Shoes and Computers. Foreign is labor-abundant, Home is capital-abundant. Free trade exists between countries. Technologies and tastes are identical across countries