Law of diminishing returns
What Law of diminishing returns means in Economics A-Level, as defined for AQA.
Definitions of Law of diminishing returns
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Reference: AQA
Each additional worker eventually adds less to total output, so the marginal revenue product curve slopes downwards, forming the firm's labour demand curve.
As successive units of a variable factor are added to at least one fixed factor, the marginal returns from each additional unit will eventually decline.
Topics that use Law of diminishing returns
- The demand for labour, marginal productivity theory (AQA A-Level)
- The law of diminishing returns and returns to scale (AQA A-Level)
Related terms
- Capacity constraints
- Costs of production
- Demand curve for labour
- Derived demand
- Diminishing marginal returns
- Economies of scale
- Factor inputs
- Factor markets
Using Law of diminishing returns in the exam
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