Economics 101: Diminishing Marginal Product | SterlingTerrell.net

Economics 101: Diminishing Marginal Product

What is diminishing marginal product?

Diminishing Marginal Product is the fact that the more a production input is added, the less that input will increase output. Eventually the added input will have no change on output, and then additional units will lower output.

Need a clear example for a boring and technical definition?

Here goes.  Take a pizza restaurant.

Pizzas produced per hour is our output, and the number of employees will be the input we look at.

Want more pizzas produced?

Easy, hire a few more employees.

What if we hire 10 more? 20 more? 50 more?

You see the point?

Past a certain level, adding more employees will not result in more pizzas being made.

The kitchen is only so big and after a time, people will just start to get in each others way.