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The '''law of diminishing returns''' states that a point will be reached when further additions of a variable input will yield diminishing marginal returns per unit of that variable.  This is one of the most fundamental principles in [[economics]].

The '''law of diminishing returns''' states that a point will be reached when further additions of a variable input will yield diminishing marginal returns per unit of that variable.  This is one of the most fundamental principles in [[economics]]. For example, a grocery store that raises the price of milk will make more money in the beginning. But if they raise the price too high, shoppers will go elsewhere for milk, thus reducing the store's profits.  

Note that marginal returns may increase at first based on increases in an input, and the law of diminishing returns merely states that eventually a point of diminishing returns will be reached for each input.

Note that marginal returns may increase at first based on increases in an input, and the law of diminishing returns merely states that eventually a point of diminishing returns will be reached for each input.