Terms Beginning With 'd'

Diminishing Returns

  • January 15, 2020
  • Team Kalkine

When the use of one factor of production is significantly increased, with other factors being constant, the marginal output of a production process reduces, which is referred to as diminishing returns.

In other words, if we add more labour to the production process, keeping other variables constant, the output will initially increase but will begin to fall after a certain point. This is also termed as the law of diminishing marginal returns in economics.

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