The diminishing marginal product is the reason for the lumpy output of a firm. As a business increases its production, there will be times when adding more workers or machines doesn’t lead to an increase in output. This is because each additional worker or machine adds less value than the one before it- that’s why people say there are “diminishing returns on investment”. As a business increases its production, there will be times when adding more workers or machines doesn’t lead to an increase in output. This is because each additional worker or machine adds less value than the one before it- that’s why people say there are “diminishing returns on investment”. This concept has wide implications for economies and firms alike. For example, if you’re building a factory with only 20 employees per shift, then increasing your workforce by just one person might not make sense economically speaking because the added marginal product isn’t enough to cover their salary – so diminishing marginal return can also yield negative economic outcomes. Diminishing marginal product plays into what economists call ‘economies of scale’ – referring to

LEAVE A REPLY

Please enter your comment!
Please enter your name here