Diminishing Returns Calculator

Calculate Diminishing Returns



Formula

The formula to calculate the Marginal Output (MO) is:

\[ MO = \frac{\Delta TO}{\Delta I} \]

Where:

What is Diminishing Returns?

Diminishing returns, also known as the law of diminishing marginal returns, is an economic principle that describes the decrease in the incremental output of a production process as the amount of a single factor of production is incrementally increased, while other factors remain constant. In simpler terms, it means that adding more of one input (e.g., labor or capital) to a fixed amount of other inputs will eventually yield lower per-unit returns. This concept is crucial in understanding the efficiency and productivity of production processes and is widely used in economics and business decision-making.

Example Calculation

Consider an example where:

Using the formula to calculate the Marginal Output:

\[ MO = \frac{50}{10} = 5 \]

This means that the marginal output for this example is 5 units per unit of input.