law of diminishing returns

The 'law of diminishing returns' is a key economic principle describing how increasing one factor of production, while keeping others constant, eventually leads to smaller gains in output.

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Definition

C1Economics

(technical, academic)As more units of a single input are added to a production process, the additional output produced by each new unit will eventually decrease, assuming other inputs remain constant.

Example

  • In a factory, hiring more workers initially boosts production, but beyond a certain point, the extra workers contribute less to overall output.

B2General Use

(general)Increasing effort or investment in a particular area will yield progressively smaller benefits over time.

Example

  • Spending extra hours studying might help initially, but eventually, the benefit of each additional hour diminishes.