That is the point at which the diminishing marginal returns take effect. In other words, keeping all other factors constant, the additional output gained by another one unit increase of the input variable will eventually be smaller than the additional output gained by the previous increase in input variable. work area or equipment) are held constant, the output per unit of the variable factor will eventually diminish. The law of Diminishing Returns states that the result of adding a factor of production is a smaller increase in output. number of workers) is increased while other factors (e.g. You can quickly boost your productivity and performance by understanding this concept. Law of diminishing returns, also referred to as the law of diminishing marginal returns, is a concept in economics that if one factor of production (e.g. The law of diminishing returns is an economic concept that applies to different areas of our lives. How do you read this curve Section 1: is the fastest growing part of the curve, which means that efforts invested.
That is, results arent always proportional to the efforts invested. Basically, the extra output obtained by increasing one input, while the other inputs are constant, decreases over time. This curve shows that the relationship between investment and returns is not proportional. After being introduced by Turgot in 1767 it has become accepted as one of. The law of diminishing returns states that in production processes, adding more of one factor of production, while keeping all other factors constant will at some point result in smaller per unit incremental returns. Diminishing Returns is a concept deeply rooted in economic thought.
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