Question

What do you understand by law of diminishing returns?

Hint:

Law of Diminishing Returns = “Too many inputs with fixed resources → falling efficiency.”

Answer 1

Step 1: Definition.
The law of diminishing returns states that as more and more units of a variable factor (e.g., labour) are added to a fixed factor (e.g., land), after a certain point, the marginal (additional) output decreases.
Step 2: Example.
If labour is continuously added to a fixed piece of land, initially output increases, but later, each additional worker adds less output than the previous one.
Step 3: Importance.
It explains the limits of production and helps in resource allocation.
Step 4: Conclusion.
Thus, the law highlights that productivity does not increase proportionately with inputs when one factor is fixed.