Law of Diminishing Marginal Productivity
The marginal product of any input in the production process is the increase in the quantity of output produced from one additional unit of that input. According to the Law of Diminishing Returns, the marginal product of an input declines as the quantity of the input increases over time, other factors remaining the same.
In the workplace, you often see diminishing marginal product, where the additional output produced per worker drops as they perform their jobs over time.
- As a manager, what are some practical things you could do to raise marginal product per employee that also benefit the firm? In your answer use a company you currently work for or one you worked for in the past.
- Give specific examples and discuss how diminishing marginal productivity affect marginal revenues and profits of firms.