Business, Legal & Accounting Glossary
A point beyond which the application of additional resources yields less than proportional increases in output.
Diminishing return, or the law of diminishing return, is an economic tenet, which provides that adding additional units of productivity beyond a certain threshold will incrementally regress production returns. The law of diminishing return is a product of Europe at the turn of the eighteenth century, where it was put forth toward free trade and agriculture. In a broad sense, the law of diminishing return states that employing additional workers may initially increase productivity. However, after a certain point adding new units of labour will result in diminishing return. This means that adding each new worker will create a marginal diminishing return, which at some point may even lead to the overall diminishing return of the entire production facility. If all other facets of production remain the same, diminishing return is typically brought on by the overpopulation of the labour force. A diminishing return may also be associated with the hiring of less than adequately skilled resources.
You should always know when you are facing a diminishing return and decide when it is right to step away.
There was a diminishing return for us and I asked my friend to look into that area of our business and fix it.
Our CEO refused to invest any more money in our digital search division because the products were not successful and he felt there would be a diminishing return on any more capital invested.
diminishing marginal product
return
decreasing returns to scale
Law of Diminishing Returns
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This glossary post was last updated: 29th October, 2021 | 0 Views.