|
| |
The law of diminishing returns is a decrease in incremental output as you add more of a resource such as labor. The law of diminishing returns can be used to describe a number of business scenarios such as the ability for small innovative firms to outperform a much larger competitor.
ExampleIf you put 10 engineers on a project they may finish in 40 work days. If you assign 100 engineers to the same project they may finish in 30 days. Each extra engineer adds less and less value as the overhead of communicating and dividing the work increases. Eventually, returns from adding an additional engineer can turn negative. |
Type | | Definition | Decreasing incremental output from additional resources. | Example | Fertilizer helps a plant until a certain point but eventually can harm it if you add too much. | Related Techniques | |
Economics
This is the complete list of articles we have written about economics.
If you enjoyed this page, please consider bookmarking Simplicable.
© 2010-2024 Simplicable. All Rights Reserved. Reproduction of materials found on this site, in any form, without explicit permission is prohibited.
View credits & copyrights or citation information for this page.
|
