law of diminishing marginal returns
Cram more and more people into a small kitchen and at first things speed up — but soon they are bumping into each other, queuing for the one oven, getting in the way. Each extra cook still helps, but helps less than the cook before. That everyday experience is the law of diminishing marginal returns, one of the most reliable patterns in all of economics.
Precisely stated: if you keep adding more of one input (say labour) while holding at least one other input fixed (say the kitchen and its single oven), then beyond some point the extra output from each additional unit of the variable input — its marginal product — starts to fall. Note three things. First, it is about the marginal contribution shrinking, not total output falling; the total usually still rises, just more slowly. Second, it eventually bites because something is fixed — there is only so much oven to go round. Third, it is a short-run idea: in the long run you could buy a second oven and the constraint disappears.
This single law explains why marginal cost rises and so why supply curves slope upward — as each extra worker adds less output, each extra unit of output costs more to make. It is why a farmer cannot feed the world from one flowerpot by piling on ever more seed and water, and why throwing more programmers at a late software project can actually slow it down. It is a law about proportions, not about effort or quality: the workers are not getting lazier, there is simply too little fixed equipment to spread among them.
On a fixed plot of land, the first sack of fertiliser might add 200 kg of crop, the second 150 kg, the third 90 kg, the fourth just 30 kg. Each sack still helps, but each helps less — the land, the fixed input, can only do so much.
Pile more of one input on a fixed base and each extra unit eventually does less.
Diminishing returns is not the same as diseconomies of scale. Returns are short-run, with something fixed and only one input varying; economies of scale are long-run, with everything scaling up together. Mixing them up is one of the most common student errors.