Definition of
law of diminishing returns
increase in one area has limited effect a rule stating that as one factor of production is increased, while others remain constant, the extra output generated by the additional input will eventually fall. The law of diminishing returns therefore means that extra workers, extra capital, extra machinery, or extra land may not necessarily raise output as much as expected. For example, increasing the supply of raw materials to a production line may allow additional output to be produced by using any spare capacity workers have. Once this capacity is fully used, however, continually increasing the amount of raw material without a corresponding increase in the number of workers will not result in an increase of output.
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