Diminishing Returns
Diminishing returns is an economic concept that states that as more of a resource is used, the marginal output of that resource will eventually decrease. This means that the more of a resource is used, the less benefit it will provide. This concept is also known as the law of diminishing returns. It is an important concept in economics, as it helps to explain why certain investments may not be as profitable as expected.
History of Diminishing Returns
The concept of diminishing returns was first introduced by the Scottish economist David Ricardo in 1817. He used the concept to explain why land rents increased as population increased. He argued that as more people used the same amount of land, the marginal output of the land would decrease. This concept has since been applied to other resources, such as labor, capital, and technology.
Table of Comparisons
| Resource | Marginal Output |
|---|---|
| Land | Decreasing |
| Labor | Decreasing |
| Capital | Decreasing |
| Technology | Decreasing |
Summary
Diminishing returns is an economic concept that states that as more of a resource is used, the marginal output of that resource will eventually decrease. This concept is important in economics, as it helps to explain why certain investments may not be as profitable as expected. For more information about this concept, you can visit websites such as Investopedia, The Balance, and Khan Academy.
See Also
- Marginal Cost
- Marginal Revenue
- Marginal Utility
- Opportunity Cost
- Production Function
- Law of Diminishing Marginal Utility
- Law of Diminishing Returns
- Law of Increasing Opportunity Costs
- Economies of Scale
- Diseconomies of Scale
