LAW

OF
DIMINISHING
RETURNS
 LAW OF DIMINISHING RETURNS
• The law of diminishing returns states that “if increased amounts of a variable
resource are added o fixed resource, Marginal Output first rises, reaches a
maximum and eventually declines.
• For example, the fixed input is land , the varying factor is the fertilizer
• Another example:
• If a particular input (fertilizer) is increased, unit by unit, there is an incremental
(small) increase in output up to a point!
• After this point, any further increase in input does not increase the rate of
output.
• The rate of increase of output declines with each additional unit of input.
• This is the law of diminishing returns.