Diminishing Returns

Diminishing returns is an economic principle that describes how, after a certain point, adding more of a resource (like labor or capital) to a production process will yield smaller increases in output. For example, if a farmer adds more fertilizers to a field, initially the crop yield might rise significantly. However, after a certain amount, adding even more fertilizer produces less and less additional yield, potentially even harming the plants. This concept helps in understanding efficiency and the balance needed in resource allocation to maximize productivity.