Law of Diminishing Marginal Returns and Per-Worker Production

LAW OF DIMINISHING MARGINAL RETURNS AND PER-WORKER PRODUCTION 3

Lawof Diminishing Marginal Returns and Per-Worker Production

Lawof Diminishing Marginal Returns and Per-Worker Production

Thelaw of diminishing marginal returns underlines the fact that theproductivity pertaining to a variable input would decline as more ofit is utilized in short-run production if one or more inputs remainsconstant. This would primarily be examining the amount of output thatwould be produced in instances where labor is added to a particularamount of capital. According to the law of diminishing marginalreturns, there will initially be an increase in the output, with themarginal output decreasing with an increase in workers (McEachern,2012). Per-worker production function, on the other hand, tries tomodel the amount that a single employee would produce on the basis ofeither the available capital or land. In this case, it demonstratesthe relationship between capital per worker and output per worker.

Scholarshave underlined the fact that as the capital per worker goes up,there would be an increase in the productivity of workers/ output perworkers albeit at a diminishing rate. This is essentially the law ofdiminishing marginal returns of capital which states that after aparticular level of capital, any increase in the capital would resultin less and less output or productivity per worker (McEachern, 2012).Essentially, the two may be seen as the opposites of one coin. In thecase of per-worker production function, the variable would be theamount of capital and examining how the variation would affect theproductivity of workers (McEachern, 2012). The law of diminishingreturns, on the other hand, would plot how the productivity workerswould change given a variation of these factors of production.

References

McEachern,W. A. (2012). Economics: A contemporary introduction. Mason, OH:South-Western Cengage Learning.