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Economic Theory: Law of Diminishing Demand

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The law of diminishing returns is a very important concept in economic theory. In a couple of sentences define the term and explain its importance? Using this theory, what happens to the marginal product of labor as you introduce many workers into the economy (Hint: Do workers become more or less productive and why)? Can you provide a situation in your own lives where the law of diminishing marginal productivity can be observed?

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Solution Summary

The law of diminishing demands is determined. Economic theory concepts are given. The marginal productivity is observed.

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The law of diminishing returns state that as a producer of goods uses more of a variable production input, with a given quantity of other fixed inputs, the marginal product of the variable input eventually diminishes. Thus the law of diminishing returns help ...

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