Diminishing Returns
Diminishing returns can be divided into three categories:
- Diminishing Total returns, which implies reduction in total product with every additional unit of input. This occurs after point A in the graph.
- Diminishing Average returns, which refers to the portion of the APP curve after its intersection with MPP curve.
- Diminishing Marginal returns, refers to the point where the MPP curve starts to slope down and travels all the way down to the x-axis and beyond.
Putting it in a chronological order, at first the marginal returns start to diminish, then the average returns, followed finally by the total returns.
Read more about this topic: Production Theory
Famous quotes related to diminishing returns:
“If the Russians have gone too far in subjecting the child and his peer group to conformity to a single set of values imposed by the adult society, perhaps we have reached the point of diminishing returns in allowing excessive autonomy and in failing to utilize the constructive potential of the peer group in developing social responsibility and consideration for others.”
—Urie Bronfenbrenner (b. 1917)