Readers Question: if the production of food crops is increasing at a diminishing rate what factors of demand can reverse this trend.
Increasing at a diminishing rate implies that agricultural output is struggling to grow – despite more fertilisers and capital investment. Diminishing returns means that as we employ more factors of production – the marginal product begins to fall.
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 the 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 farmers have exhausted productivity levels with the use of chemical fertilisers/tractors e.t.c.
Diminishing returns and static demand
Also, if there are diminishing returns from the 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)
If there are diminishing returns within UK farming, it will encourage supermarkets to import food from abroad, which are not subject to the same diminishing returns. Increased demand from the UK may encourage other countries to slowly increase their food production.
Alternatives to traditional food
One solution may be to consider different types of food. For example, some foodstuffs are more land and resource-intensive. For example, meat production is more resource-intensive than getting plant protein. Therefore, declining agricultural production may shift demand to different types of food.
Another alternative is that companies will develop lab-grown food or use genetically modified food which can reverse the trend in diminishing returns.