Hank 瀚克

LOS 14.d: Describe the phenomenon of diminishing marginal returns.

Factors of production (生產要素) are the resources a firm uses to generate output. Include:

(1.) Land— where the business facilities are located.

(2.) Labor— all workers from unskilled laborers to top management.

(3.) Capital— “physical capital” or “plant and equipment” (manufacturing facilities, equipment, and machinery) to distinguish it from financial capital.

(4.) Materials— inputs into the productive process, including raw materials.

For economic analysis, we often consider only two inputs, capital and labor. (經濟分析中，通常考慮資本與勞動兩種要素的投入)

(The quantity of output that a firm can produce can be thought of as function of the amounts of capital and labor employed.)

Such a function is called a production function(生產函數).

(1.) For quantities of labor between zero and A, the marginal product of labor is increasing (slope is increasing).

如圖，期初，當工人的數量在0~A時，增加的每一個工人所帶來的產出增加量在遞增。這可能歸功於公司中，員工進行分工合作，各司其職，進而提升了勞動生產率。

(2.) Beyond the inflection point in the production at quantity of labor A up to quantity B, the marginal product of labor is still positive but decreasing.

(the slope of the production function is positive but decreasing, and we are in a range of diminishing marginal productivity of labor).

When we reach the quantity of labor for which the additional output for each additional worker begins to decline, we have reached the point of diminishing marginal productivity of labor, or the labor has reached the point of diminishing marginal returns. 

當工人數量在A~B時，增加每一個工人所帶來的產出增加量在遞減，但增加量仍然為正。

(3.) Beyond the quantity of labor B, adding additional workers decreases total output (the marginal product of labor in this range is negative, and the production function slopes downward.)

當工人數量在B以上時，增加新的工人導致總產出減少。

圖片來源 CFA 2019 NOTE