grain. Due to diminishing returns, the price of a good increases as the quantity produced increases, resulting in an upward-sloping supply curve. Taking Ricardo's law of diminishing returns one step further was Thomas Malthus. Malthus considered the increase in population that was occurring over time in comparison to the fixed supply of land. With diminishing returns prominent as increasing amounts of land are required to feed the growing population, there would eventually be a shortage of food. Agricultural output per acre would expand at a diminishing rate as increasingly marginal land was used to feed more and more people. Eventually, Malthus predicted, famine and starvation would result. So far, Malthus's predictions have not been realized on a global scale. Although starvation does occur, it is a result of local conditions. At the present time, world food production is sufficient to accommodate the world's people. Population growth accompanied by famine has not been a problem due to the technological changes that have made workers and land more productive. The use of increasing amounts of fertilizers and better capital has easily offset any diminishing returns due to the use of lower quality land. In many cases, prices of goods have fallen in the long-run as output has expanded. To complete the theory of price determination, Alfred Marshall looked at the margin. Along the producer's supply curve, higher prices are required to increase the quantity supplied. The supply curve shows the increasing cost of making an additional (marginal) unit of the good; its upward slope reflects increasing marginal costs. While along the consumer's demand curve, lower prices are required to induce the consumer to buy that additional unit of the good produced. The downward slope of the demand curve reflects decreasing marginal usefulness. By combining demand and supply, Marshall showed how the two curves simultaneously determined price. A Great Depres...
