The law of diminishing marginal returns is also referred to as the "law of diminishing returns," the "principle of diminishing marginal productivity," and the "law of variable proportions." This law affirms that the addition of a larger amount of one factor of production, ceteris paribus, inevitably yields decreased per-unit incremental returns.
What is the law of diminishing returns?
The law of diminishing returns is not only a fundamental principle of economics, but it also plays a starring role in production theory. Production theory is the study of the economic process of converting inputs into outputs.
What are diminishing returns?
Diminishing returns are due to the disruption of the entire production process as additional units of labor are added to a fixed amount of capital. The law of diminishing returns remains an important consideration in areas of production such as farming and agriculture.
