Definition
With this concept, we are referring to the behavior of production in the short and long run as the quantity of inputs increases. It is an economic law describing that at a certain point further increases in a production factor (labor, capital, technology) holding other inputs constant does not yield greater output. What happens is that beyond a certain point, production fails to increase proportionately with added investment, effort, or skill. More specifically, a production function has decreasing returns to scale if an increase of an equal percentage in all factors of production causes at some point an increase in output of a smaller percentage, yielding lower per-unit returns. It can also be stated saying that it refers to a decrease in the marginal quantity of output produced as the amount of one input increases while holding the amounts of all other...
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Riera-Prunera, C. (2023). Diminishing Returns. In: Maggino, F. (eds) Encyclopedia of Quality of Life and Well-Being Research. Springer, Cham. https://doi.org/10.1007/978-3-031-17299-1_735
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