Question

What are diminishing marginal returns?

   What are diminishing marginal returns?

Principles of Economics

Principles of Economics

Steven A. Greenlaw,… 2nd Edition

Chapter 2, Problem 14

Instant Answer

Solved by Expert Mihir Nayar

05/12/2020

Step 1

In other words, after a certain point, each additional unit of input will result in a smaller increase in output than the previous unit. This concept is based on the law of diminishing returns, which states that as more of a variable input is added to a Show more…

Show all steps

lock

Thanks for your feedback!

What are diminishing marginal returns?

Play audio

Feedback

Powered by NumerAI

Mihir Nayar and 88 other educators are ready to help you.

Ask a new question

Labs

Want to see this concept in action?

NEW

Explore this concept interactively to see how it behaves as you change inputs.

View Labs

Key Concepts

Fixed and Variable Inputs

In the production process, fixed inputs are resources that cannot be easily changed in the short term (like machinery or land), while variable inputs can be adjusted (such as labor or raw materials). The relationship between these inputs is crucial, as the law of diminishing returns typically occurs when variable inputs are increased beyond the optimal levels set by the amount of fixed inputs.

Marginal Product

This concept refers to the additional output that is created when one more unit of an input (like labor or capital) is added to the production process, keeping all other inputs constant. Understanding marginal product is key to analyzing how changes in input levels affect overall production and efficiency.

Law of Diminishing Returns

This economic principle states that if one input in the production of a commodity is increased while the others remain fixed, a point will eventually be reached at which additions of that input yield progressively smaller increases in output. It highlights the limitations of scaling production by merely adding more of one factor without proportionally increasing other inputs.

Recommended Videos

Transcript

Ace is your personal tutor. It breaks down any question with clear steps so you can learn.

Start Using Ace

Continue solving this problem

Create a free account to:

View full step-by-step solution
Ask follow-up questions with Ace AI
Save progress and study later