Difference between revisions of "Diminishing marginal returns"
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| − | The principle of '''diminishing marginal returns''' states that | + | The principle of '''diminishing marginal returns''' states that [[production system]]s have a point beyond which each additional unit of [[input]] will yield less and less additional [[output]]. All other factors of production are held fixed for this analysis. |
| − | + | Explained a different way, diminishing marginal returns consist of the inevitable point beyond which additions of a variable factor ([[input]]) will yield diminishing marginal returns ([[output]]) per unit of the variable factor. All other factors of production are held fixed for this analysis. | |
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| − | + | Note that at first there may be increasing marginal returns, and this principle about diminishing marginal returns expresses what will be inevitably reached as inputs are increased. | |
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| − | + | Example: there are diminishing marginal returns in painting a house. The initial workers yield great [[output]], but adding more and more workers to the job will inevitably lead to less and less additional [[output]] as the workers begin to distract each other and lack opportunities for improving the result, | |
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| − | + | [[Category:Economics]] | |
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Revision as of 13:00, August 19, 2007
The principle of diminishing marginal returns states that production systems have a point beyond which each additional unit of input will yield less and less additional output. All other factors of production are held fixed for this analysis.
Explained a different way, diminishing marginal returns consist of the inevitable point beyond which additions of a variable factor (input) will yield diminishing marginal returns (output) per unit of the variable factor. All other factors of production are held fixed for this analysis.
Note that at first there may be increasing marginal returns, and this principle about diminishing marginal returns expresses what will be inevitably reached as inputs are increased.
Example: there are diminishing marginal returns in painting a house. The initial workers yield great output, but adding more and more workers to the job will inevitably lead to less and less additional output as the workers begin to distract each other and lack opportunities for improving the result,