What happens during the stage of diminishing returns?

In the stage of diminishing returns, output increases at a decreasing rate. This concept is rooted in the economic principle that while adding consistent amounts of a factor of production (like labor or capital) continues to enhance total output, each additional unit contributes less to overall production than the previous unit.

For instance, if a farmer keeps adding workers to a fixed size of land, the initial additions will significantly boost harvests, but as more workers are added, the effectiveness of each additional worker may decline. They may hinder each other's productivity due to overcrowding, limited equipment, or other constraints, leading to smaller increases in output over time.

This behavior highlights the importance of not only the quantity of input used but also how well it interacts with other factors, illustrating the law of diminishing returns, which is a fundamental concept in economics and production theory.