Dealing with Diminishing Crop Yields

Readers Question: if production of food crops is increasing at a diminishing rate what factors of demand can reverse this trend.

If the production of food crops is increasing at a diminishing rate, then it is likely to increase the marginal cost of food production. If demand is rising faster than the supply of food then the market price will rise. Demand for food crops tends to be inelastic. Therefore, if price of food rises there will be only a small % fall in demand. Therefore, there could be an increase in revenue for farmers. This increase in revenue could give farmers an incentive to increase investment in agriculture. e.g. farming new land, using better technology to try and improve yields. Therefore, in the long run, the diminishing returns and higher prices may encourage greater supply.

However, that is only one possibility. For example, maybe there is no new land to farm. Maybe famers have exhausted productivity levels with use of chemical fertilisers / tractors e.t.c.

Also, if there are diminishing returns from increasing supply, but, not an increase in demand then prices won’t rise but fall. This may lead to lower revenues for farmers. Eventually some may go out of business (unless subsidised by government which often happens)

• Diminishing returns in short run
• Law of diminishing Marginal returns