Okuzeka
Economics vocabulary · Core Concepts

Diminishing returns

Meaning in economics, with examples

nounCommon term

In economics, diminishing returns means: The point at which adding more of one input, while the other inputs stay fixed, produces smaller and smaller increases in output.

In Turkish: azalan verimler, azalan getiriler

How it is used

Taught as the law of diminishing returns, or diminishing marginal returns. The classic example is adding more and more cooks to the same small kitchen. Outside economics, people say an activity has reached the point of diminishing returns when extra effort brings less benefit.

Example sentences

  1. Adding a third worker to one machine leads to diminishing returns, because they start getting in each other's way.

  2. After a certain amount of fertiliser, the farm hits diminishing returns and yields barely rise.

Common collocations

  • the law of diminishing returns
  • diminishing marginal returns
  • the point of diminishing returns
  • hit diminishing returns
  • marginal costThe extra cost of producing one more unit of a good or service; a key idea when a firm decides how much to produce.
  • productivityHow much output is produced from a given amount of input, most often measured as output per worker or per hour worked.
  • scarcityThe basic problem that resources such as time, money, land and labour are limited while people's wants are not, so choices always have to be made.
  • microeconomicsThe branch of economics that studies how individual households and firms make choices, and how prices are set in particular markets.

More terms: Core Concepts

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This page explains English vocabulary for learners. It is not financial advice.