Law of Deminishing Returns
What is it?
The Law of Diminishing Returns, also known as the Law of Diminishing Marginal Returns, states that as one input variable (such as labor or capital) is increased while all other inputs remain constant, there is a point at which the marginal or incremental output decreases or diminishes. In other words, there is a limit to the productivity of additional inputs, and after that point, the added input will result in a proportionally smaller increase in output.
The Law of Diminishing Returns is a principle in economics that explains how adding more of one thing to a process can, at some point, result in less effective or even counterproductive outcomes.
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Imagine you're baking cookies. You have a fixed amount of cookie dough and a certain number of cookie sheets. To make more cookies, you can add more workers to the process. Initially, adding more workers will help you make cookies faster because each worker can focus on a specific task, like mixing ingredients, rolling the dough, or putting cookies on the tray.
However, as you continue to add more workers, you'll eventually reach a point where adding more people doesn't help you make cookies any faster. This is because the kitchen space, cookie dough, and cookie sheets are limited. When too many workers are trying to use the same resources, they start getting in each other's way, and the process becomes less efficient.
In this example, the Law of Diminishing Returns tells us that there's an optimal number of workers to make cookies mo ...