>I have a small database which is up to 50 MB now. This increases every day by about 1 MB and there is practically no data being added. This database shouldn't be more than 4 to 5 MB at most. I tried shrink database but this only diminished it by a few bytes. What can I do to try to minimize the size of the MDF?

Please go through the links from comment to this blog http://blogs.lessthandot.com/index.php/DataMgmt/DataDesign/truncate-log-in-all-your-user-databases

BTW, have you switched recovery mode to simple before running shrinkfile ?