The law of diminishing returns states
What is t he law of diminishing returns ? The law of diminishing returns states that as additional units of a variable input are added to fixed inputs, the marginal product of the variable input declines after a certain point. This observation was first made by the British economist David Ricardo in the context of agriculture in nineteenth-century England, where successive doses of labor and capital yielded smaller increases in crop output. Diminishing returns also apply to manufacturing when a firm starts to exceed the capacity of its existing plant. Example of crop yield for t he law of diminishing Let's say a farmer has a fixed amount of land, let's say one acre, and they want to grow corn. They start by planting 100 seeds, and with the help of a fixed amount of fertilizer and water, they get a yield of 100 bushels of corn. If the farmer decides to increase the number of seeds planted to 200, they might see a corresponding increase in yield to, say, 180 bushels. However, ...