Diminishing Marginal Productivity

Summary of Diminishing Marginal Productivity

An economic principle that states that the production process reaches a point at which the infusion of additional units of capital and labor does not increase output commensurately to the inputs. For example, if the ten men working on an assembly line produce x units in a given time period, the addition of ten more men to the assembly line may not result in 2x of output. If, in this case, the doubling of labor inputs does not result in a doubling of output, all things being equal, a condition of diminishing marginal productivity for labor occurs.

(Main Author: William J. Miller)