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22.07.2022 - 00:33

What is the difference between diminishing marginal return and diminishing total returns?

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What is the difference between diminishing marginal return and diminishing total returns?

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Amos April 6, 2023 в 01:57

Diminishing marginal return is the concept where additional inputs of a certain factor of production cause a decrease in the marginal product or output per unit of input. In other words, the benefit of each additional unit of input decreases over time. On the other hand, diminishing total returns occur when adding more units of a factor of production causes the total output to decrease. This differs from diminishing marginal returns as marginal returns are only concerned with the change in output per unit of input, while total returns consider the overall output resulting from all inputs. For example, in agriculture, adding more fertilizer may initially increase crop yield (diminishing marginal returns), but if too much fertilizer is added, it can eventually harm the entire crop and decrease the overall yield (diminishing total returns).

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