Relation To Law of Diminishing Returns
Amdahl's law is often conflated with the law of diminishing returns, whereas only a special case of applying Amdahl's law demonstrates 'law of diminishing returns'. If one picks optimally (in terms of the achieved speed-up) what to improve, then one will see monotonically decreasing improvements as one improves. If, however, one picks non-optimally, after improving a sub-optimal component and moving on to improve a more optimal component, one can see an increase in return. Note that it is often rational to improve a system in an order that is "non-optimal" in this sense, given that some improvements are more difficult or consuming of development time than others.
Amdahl's law does represent the law of diminishing returns if you are considering what sort of return you get by adding more processors to a machine, if you are running a fixed-size computation that will use all available processors to their capacity. Each new processor you add to the system will add less usable power than the previous one. Each time you double the number of processors the speedup ratio will diminish, as the total throughput heads toward the limit of .
This analysis neglects other potential bottlenecks such as memory bandwidth and I/O bandwidth, if they do not scale with the number of processors; however, taking into account such bottlenecks would tend to further demonstrate the diminishing returns of only adding processors.
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