ALSO CALLED: Return On Investment, ROI Calculators, Cost Calculators, and IT ROI DEFINITION: The law of diminishing returns is a classic economic concept that states that as more investment in an area is made, overall return on that investment increases at a declining rate, assuming that all variables remain fixed. To continue to make an investment after a certain point (which varies from context
… Definition continues below.
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ROI DEFINITION (continued): … to context) is to receive a decreasing return on that input.
The law of diminishing returns has broader applications than economics. In fact, it is one of the most widely recognized economic principles outside of the economic classroom. In a call center, for instance, service level improvements decline in rate in relation to each additional successive agent added.
Other real-world examples abound:
A student considering one more hour of study after 2 AM.
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