The three important laws in economic that are related to cost of production

GOH HOE HOE,AJK MCA KEPONG

The three important laws in economic that are related to cost of production are i) law of increasing returns ,ii) law of constant returns ,iii) law of diminishing returns

The laws of increasing return refers to situation where an addition of one of the variable input factor bring about a reduction in per unit cost of the product and an increase in profit per unit of the product. This situation if persist will encourage to produce more. This is made possible through scale of economic , for instance when goods are produced in large quantity , the overhead cost per unit of product become lower.

The law of constant return applies when addition of one of the variable input factor does not cause any change in per unit cost of product or profit per unit of product. When this occur then immediate decision need to be taken to look for innovative method of production , or restructuring of organization to ensure sustainable growth of a company.

The law of diminishing return when addition of variable factors lead to increasing cost per unit or decreasing profit per unit. This occur as a result of improper combination of variable input factors of production , for example the machine has worked up to the capacity.

As far as power generation is concerned machine and fuel are two important variable factors. The efficiency of these two factors will ensure the success of power generation scheme that is expressed in term of price , reliability and stability of power supply.

When the power generation plant has operated near to saturation , additional power plant need to be built to avoid unexpected power interruption in future.
I am of positive altitude towards the presence of Independent power provider because of their willingness to share the risk and actively contribute their part in the economic development of Malaysia, their credit can not be denied.

However an excess of capacity of 40 % seem to be irrational because the input variable such as coal , diesel and gas can be stored while the output in the electricity form can not be stored , need to be consumed instantly. This kind of situation no doubt will lead to conditions that fulfill diminishing law, we therefore hope the relevant authorities will take immediate action to address the serious problem for the benefit of country and rakyat.