law of diminishing marginal productivity

Definition

An economic rule governing production which holds that if more variable input units are used along with a certain amount of fixed inputs, the overall output might grow at a faster rate initially, then at a steady rate, but ultimately, it will grow at a declining rate. The law of diminishing marginal productivity needs to be taken into account by manufacturing business managers who wish to expand production.

Use this term in a sentence

  • You must make sure that you don't get caught up in the LAW OF DIMINISHING MARGINAL PRODUCTIVITY or your business will suffer.

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  • I went over the economic rules and one of the first ones I learned about was the law of diminishing marginal productivity.

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  • Large scale manufacturers use the law of diminishing marginal productivity to help determine the optimal size and scale of an upcoming new warehouse to maximize returns on investment.

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