what is law of diminishing return?

Answer 1

When one of the factors of production is held fixed in supply, successive additions of the other factors will lead to an increase in returns up to a point, but beyond this point returns will diminish.



This is correct. Returns will diminish after so many factors of production are added. Basically it means that one is producing beyond the most efficient level.

Answer 2

Every production process requires some inputs (space, raw materials, labor, equipment). Let's imagine a very common production process, cooking. Let's also imagine that some inputs (ingredients and cooks) are available in any quantity we want while others (kitchen space, stove burners, pans, pots, and utensils) are "fixed" (the economist's word meaning "we have what we have, and we can't get any more, at least not right away").

Now let's put a single cook into our fixed kitchen, tell him to cook as much as he can and measure his output. Let's say he produced 50 meals. Now let's add second cook into the situation. It's very likely that two cooks will produce more than 100 meals, because they will divide up the work and thus save a lot of time and effort. This is called increasing returns; doubling the variable input (labor) more than doubles the output (meals).

Now what happens if we keep adding cooks without expanding the kitchen? Increasing returns will continue for a while, but eventually, addition of a new cook will bring a smaller increase in the number of meals than the one before it; crowding (of cooks in the kitchen and pots on the stove) will become an issue. This will be the onset of diminishing returns; adding the Nth unit of the variable input will result in smaller output increase compared to adding the (N-1)th unit.

Answer 3

The law of diminishing returns is a main concept in economics that essentially says that as you add more and more of a resource, production (output) will not increase at the same level.

For example, if you start with one person who can make 10 units, then add a second, you won't automatically make 20. Yes, production will increase as you add more and more resources, but each resource performs at it's own level, and eventually you reach a maximum output capacity.

The law of diminishing return shows this relationship.

Answer 4

The law of Diminishing Returns states that 100% achievement is impossible and as people try to achieve things 100%, the cost becomes imprctical. Say the world wanted to rid itself of pollution. In order to decrese it by 50%, there would be super-strict regulation. Outlawing industry outhtright would decrease pollution by 60%. Not farming would decrease it by 75%. No matter how hard we try, each extra % is going to be harder and harder to achieve until it is virtually impossible. After people quit brething, then pollution is cut by 95%. Better not excrete, exhale, or sweat! You'd be polluting! See, due to the law of diminishing returns, it is near-impossible to achieve perfection. Water is not 100% clean. No-one's going to take the time to sort out water and impurity molecules ATOM by ATOM. This is the law of diminishing returns. i'd be much more pracitcal just to pass the water through a filter and leave well enough alone. This applies to economics when discussing industrial output: no matter how much money you throw at a samll factory, it can't produce the world's supply of widgets, and the marginal cost will skyrocket with each widget produced.

Answer 5

The law of diminishing return states that as the number of units produced increases, the cost per unit of production decreases.

Answer 6

The law of diminishing returns (diminishing marginal returns) states that as a consumer receives more of a given product, their benefit with each additional unit of consumption decreases.

For example, if you want two cheeseburgers, but have the money for five cheeseburgers, your marginal return will be at a maximum with the consumption of the second cheeseburger, but will decrease with each additional cheeseburger until your income is exhausted.

Answer 7

Hi,

The law of diminishing returns is economics concept which tells you that as you produce more the cost decreases.

Beyond staturation point the costs increases rather than reduces as you increse the output beyond certain point/

Answer 8

as you add units of an input, for example, labor, the marginal increases in productivity (aka-the 'return') diminishes.
it's like, think of a restaurant, with one guy the work goes slowly, with two it will go allot faster, but adding a third (or some other arbitrary number) might not increase productivity as much as adding the second worker did, the *return* has *diminished*
see what i'm sayin?

Answer 9

It comes from supply and demand. Prices rise as demand increases and supply decreases. Prices fall as demand falls and supply increases. Therefore, as a producer, the incremental profit (return) on additional production falls (diminishes) with the price of the product.

Answer 10

In simple terms it is when you are providing more resources than the output would generate with less resources. As an example, if you were running a factory producing widgets, and you had 1200 employees. Assume in stupidity you decided to hire 120,000 employees, with each of them getting in the way of the other and not enough room in the factory. Your production would decrease....Yet you put 100 times the resources into it.