Law of Diminishing Returns-- A speed breaker to excessive greed

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‘Diminishing returns’ or ‘Diminishing marginal returns’ is one of the oldest and most fundamental economic concepts. In simple terms, ‘diminishing returns’ means the decrease/ per unit in the output of a production exercise when only single production input is increased keeping all other factors of production unaltered.


The ‘law of diminishing returns’ states that in every production process, addition of more and more of a single factor of production , while keeping supply of all other factors of production constant does not result in proportionate increase in the output. At some point, there will infact be a lower return of output/ unit of input. The law is also called ‘law of diminishing marginal returns’ or  law of increasing relative cost’.


It is not very difficult to establish the veracity of the law. When we talk of the factors of production process and the output/ product of the process, we understand that the output is the resultant of contribution from all factors of production in some definite proportions. When a particular factor of production is added, while keeping all other factors constant, the contribution from the increased factor will not be matched by contributions from other factors of production. As a result, the quantity of output does not increase. Adding more and more of a single factor does not result in any increase in the quantity of output.



Even though ‘diminishing returns’ is an economic concept, it finds extensive applications in various areas like agriculture, medicine, industry, human relations and personnel management. These applications can be understood by several examples.


In agriculture, fertilizers used fro increase in crop yield give very good results in the beginning. But increase in the quantity of fertilizers, increases the crop yield to some extent but not proportionately to the quantity of fertilizers. The crop yield per unit of fertilizer decreases as the quantity of fertilizer in increased.


Law of diminishing returns finds applications in Industry also. When once the right combination of factors of production for a particular product is arrived at, any attempt to increase production should entail increase in supply of all factors of production in respective proportions. Here increase in a few factors does not result in the desired increase in the output.


HR experts experience the ‘law of diminishing returns’ several times. A worker produces more in the first few hours of his/ her work, while the same work/ hour cannot be turned during later part of his/ her working time. HR experts should be very cautious in extracting overtime work from the workers, since during the overtime period , not much work will be really turned out.


‘Law of diminishing returns’ is a real speed breaker on excessive greed of man since it puts a check on excessive exploitation of any particular factor of production by diminishing the returns. provides expert economics assignment help / economics homework help at We provide assistance for students on their economic assignments, economics homework, economics projects with detailed analysis and explanation apart from providing online tutoring services, economics essay/economics paper editing services and dissertation and thesis consulting services at very affordable prices. Our team helped scores of students in institutes, regular and online universities and online programs.