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Diminishing marginal returns (view source)

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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.

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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,

[[Category:Economics]]

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