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Chapter 2: Q14 (page 44)

What are diminishing marginal returns?

Short Answer

Expert verified

Diminishing Marginal Returns state that : Additional increments of resources in a purpose cause marginal benefit from those additional increments to fall.

Step by step solution

01

Basic Concept 

The concept of Diminishing Marginal returns states that : as more & more units of resources are used in production of a commodity, the additional output increase with each successive resource units - keeps on decreasing.

02

Further Explanation & Example 

The concept implies that lesser the existing resources in production of a good, more an additional resource unit will increase its production. And more the existing resources in production of a good, lesser an additional resource unit will increase its production.

Example : When government spends on a purpose, the initial gains from spending are higher than that of further spendings.

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