Diminishing Returns Law Research Essay

A state will eventually be reached where the addition of the input produces increasingly smaller increases in output, according to the law, if one input used in the production of a product is increased while all other inputs are kept constant. This concept, which also goes by the name “diminishing marginal productivity,” is relevant when discussing production. The principle of diminishing marginal utility can be used to allude to the law when it concerns consumption. (Sraffa 1926). If the variable factor of production such as labour is enhanced, there comes the point where the factor will become less productive and in the long run, there will be a decreasing marginal and then average commodity. For example, the manager of small café might decide to employ more workers in an attempt to serve the customers better. However, since the size of the restaurant and other factors remain the same, each worker will get in each other’s way as they strive to improve production. Therefore, if more workers are hired, production could grow but more and more gently (Staff 2014).

When considering consumption, the law of diminishing marginal utility states that as a consumer takes more quantity of a particular commodity, the utility from the successive portions he consumes goes on decreasing. For example, a thirsty man dashes to the shop and buys a bottle of juice. The bottle of juice has immense use for him. He buys and consumes a second bottle; the utility of this second bottle will be lower than the previous one because the degree of the craving has been reduced to a huge magnitude. The utility will keep diminishing with every consecutive bottle of juice until it drops to zero (Law of Diminishing Marginal Utility)

References

Law of Diminishing Marginal Utility: (n.d.). Retrieved October 03, 2017, from http://economicsconcepts.com/law_diminishing_marginal_utility.htm

Sraffa, P. (1926). The Laws of Returns under Competitive Conditions. The Economic Journal, 36(144), 535. doi:10.2307/2959866

Staff, I. (2014). Law of Diminishing Marginal Returns. Retrieved October 03, 2017, from http://www.investopedia.com/terms/l/lawofdiminishingmarginalreturn.asp