Marginal Returns
Isai Castillo
Econ 102
Professor Crane
April 17, 2013
Law of Diminishing Marginal Returns People might think that in order to get something done more efficiently and faster it is best if we have more workers. Here comes a big disclaimer, this idea is false. The law of diminishing marginal returns helps explain the concept on how more workers can turn out into a poor outcome. This essay will describe the law of diminishing marginal returns and explaining how it works. I will start of by giving the book definition. In our text book this law is defined as, “ ever larger amounts of a variable input are combined with fixed inputs, eventually the marginal physical product of the variable input will decline” (177). This is stating that the more workers you have with a fixed resource the less you will accomplish. The reason for is because there are more workers than fixed inputs. For example, Say you have a painting business and you only have two paint guns. If you are the only one working you might only complete two houses on a day with a marginal product of two. Now if you add an additional worker the quantity output will be 7 houses in one day. Your marginal product will go from two to five. Now say you add an extra worker, you might be able to finish 10 houses but your marginal product will start decreasing along with your quantity output. It is not because that extra worker is lazy but because of the fact that their capital is fixed and only have a limited amount of paint guns. The law of diminishing marginal returns says that as you add additional workers to fixed resources your quantity output and marginal product will eventually decrease. If there are fewer workers they can manage to specialize and have assigned duties that will help accomplish more. On the other hand if there are more workers and fewer tools it will be difficult to accomplish more because of lack of
Econ 102
Professor Crane
April 17, 2013
Law of Diminishing Marginal Returns People might think that in order to get something done more efficiently and faster it is best if we have more workers. Here comes a big disclaimer, this idea is false. The law of diminishing marginal returns helps explain the concept on how more workers can turn out into a poor outcome. This essay will describe the law of diminishing marginal returns and explaining how it works. I will start of by giving the book definition. In our text book this law is defined as, “ ever larger amounts of a variable input are combined with fixed inputs, eventually the marginal physical product of the variable input will decline” (177). This is stating that the more workers you have with a fixed resource the less you will accomplish. The reason for is because there are more workers than fixed inputs. For example, Say you have a painting business and you only have two paint guns. If you are the only one working you might only complete two houses on a day with a marginal product of two. Now if you add an additional worker the quantity output will be 7 houses in one day. Your marginal product will go from two to five. Now say you add an extra worker, you might be able to finish 10 houses but your marginal product will start decreasing along with your quantity output. It is not because that extra worker is lazy but because of the fact that their capital is fixed and only have a limited amount of paint guns. The law of diminishing marginal returns says that as you add additional workers to fixed resources your quantity output and marginal product will eventually decrease. If there are fewer workers they can manage to specialize and have assigned duties that will help accomplish more. On the other hand if there are more workers and fewer tools it will be difficult to accomplish more because of lack of