What do you understand by the law of diminishing returns? Can you give example of when...

What do you understand by the law of diminishing returns? Can you give example of when diminishing returns have set at the place you work? If diminishing returns have a set in then in then what do you think is happening to the short run costs? Why?

Expert Solution

Answer :

A concept in economics that if one factor of production (number of workers, for example) is increased while other factors (machines and workspace, for example) are held constant, the output per unit of the variable factor will eventually diminish.

Although the marginal productivity of the workforce decreases as output increases, diminishing returns do not mean negative returns until (in this example) the number of workers exceeds the available machines or workspace. In everyday experience, this law is expressed as "the gain is not worth the pain."

The Law of Diminishing Returns states that as more units of one input are added, with other inputs held constant, the Marginal Product (the additional output from each added input) will eventually decrease.

A simple example is the effect of adding additional workers to a production process. Adding a few workers might increase the labour force but it is not necessarily it increases the output.

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Rahul Sunny answered 2 years ago

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