– Law of diminishing marginal return is applied when unlimited resources to find out the most profitable level of resource use.
– In reality, cultivator has limited land, irrigation and capital etc. There are several alternatives for spending limited amount of capital or money can be achieved by using the principle of equi-marginal returns.
– For eg: there is Rs. 50000 for investing and locality is favorable to take crop, dairy and poultry enterprise.
– The limited resources should be allocated among the alternative use in such a way that the MVP of the last unit of the resource is equal in all uses.
– Thus it can be stated that amount should be invested in such a way that marginal returns should be equal in all the alternatives.
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