Diminishing Marginal Productivity and the Supply Curve. In your own words, explain the law of diminishing marginal productivity. Be sure to mention why the law tends to hold in the short run.
In your own words, explain the law of diminishing marginal productivity. Be sure to mention why the law tends to hold in the short run.
Based on your readings this week, in your opinion which factors impact the supply curve for physicians the most? In your own words, explain how each factor impacts the supply curve.
The law of diminishing marginal productivity is an economic principle usually considered by managers in productivity management. Generally, it states that advantages gained from slight improvement on the input side of the production equation will only advance marginally per unit and may level off or even decrease after a specific point.
The law of diminishing marginal productivity involves marginal increases in production return per unit produced. It can also be known as the law of diminishing marginal product or the law of diminishing marginal return. In general, it aligns with most economic theories using marginal analysis. Marginal increases are commonly found in economics, showing a diminishing rate of satisfaction or gain obtained from additional units of consumption or production.
The law of diminishing marginal productivity suggests that managers find a marginally diminishing rate of production return per unit produced after making advantageous adjustments to inputs driving production. When mathematically graphed this creates a concave chart showing total production return gained from aggregate unit production gradually increasing until leveling off and potentially starting to fall.
Different than some other economic laws, the law of diminishing marginal productivity involves marginal product calculations that can usually be relatively easy to quantify. Companies may choose to alter various inputs in the factors of production for various reasons, many of which are focused on costs. In some situations, it may be more cost-efficient to alter the inputs of one variable while keeping others constant. However, in practice, all changes to input variables require close analysis. The law of diminishing marginal productivity says that these changes to inputs will have a marginally positive effect on outputs. Thus, each additional unit produced will report a marginally smaller production return than the unit before it as production goes on.
Marginal productivity or marginal product refers to the extra output, return, or profit yielded per unit by advantages from production inputs. Inputs can include things like labor and raw materials. The law of diminishing marginal returns states that when an advantage is gained in a factor of production, the marginal productivity will typically diminish as production increases. This means that the cost advantage usually diminishes for each additional unit of output produced.
In its most simplified form, diminishing marginal productivity is typically identified when a single input variable presents a decrease in input cost. A decrease in the labor costs involved with manufacturing a car, for example, would lead to marginal improvements in profitability per car. However, the law of diminishing marginal productivity suggests that for every unit of production, managers will experience a diminishing productivity improvement. This usually translates to a diminishing level of profitability per car.
Diminishing marginal productivity can also involve a benefit threshold being exceeded. For example, consider a farmer using fertilizer as an input in the process for growing corn. Each unit of added fertilizer will only increase production return marginally up to a threshold. At the threshold level, the added fertilizer does not improve production and may harm production.
In another scenario consider a business with a high level of customer traffic during certain hours. The business could increase the number of workers available to help customers but at a certain threshold, the addition of workers will not improve total sales and can even cause a decrease in sales.