AGRICULTURAL ECONOMICS 



area A T X' X, which represents the total product 

 of X composite units of the two factors, laborers 

 and capital-goods. That part of the rectangle 

 lying between the line H H' and line 1 1', for ex- 

 ample, represents the average return per unit. 

 Had the applications stopped at I, after the appli- 

 cation of but six units, the total product would be 

 represented by the area A I' I, or the rectangle 

 A W N I, and the average return per unit would 

 have been less. Likewise had the applications 

 been increased to nine units, the average return 

 per unit would have fallen. Hence a curve of 

 increasing and diminishing average returns may 

 be drawn, based upon the increasing and dimin- 

 ishing returns of the successive composite units 

 of labor and capital-goods. This curve of aver- 

 ages is represented by line AX' P (Fig. i) which 

 is so drawn that it will pass through the upper 

 right hand corner of any rectangle which has 

 AC, A D, A E, etc., or any part thereof, as a base 

 and which encloses an area equal to the area A C 

 C, AD' D, A E' E, etc., respectively, as rect- 

 angles A W N I and A V X' X have been drawn 

 in Fig. I. 



As illustrated in Fig. i, the curve of averages 

 reaches the highest point at X' and the highest 

 average product per unit is gained by employing 

 seven and two-fifths units per acre, and it will 

 be seen at once that, since all the charges which 

 must be deducted are a fixed amount per com- 



IO2 



