Finance
What is Diminishing returns?
The law of diminishing returns says that adding more of one input eventually produces smaller and smaller gains. For example, one more worker helps a lot at first, but past a point each extra worker adds less — a key idea in economics and productivity.
See it, don’t just read it.
Watch a 2-minute lesson with voice + animation that explains diminishing returns.
Key things to understand
- 1Adding more of an input yields shrinking extra output.
- 2Early additions help a lot; later ones help less.
- 3It guides how much of a resource to use.
- 4It applies to work, study, fertilizer, spending, and more.
Frequently asked questions
- What is the law of diminishing returns?
- The principle that beyond a point, each extra unit of input produces a smaller increase in output.
- What's an example of diminishing returns?
- Studying helps, but the tenth hour in a row adds far less than the first.
- Why do diminishing returns matter?
- They help decide the most efficient amount of a resource to use before extra input is wasted.