Another important law in economics is the “law of marginal returns or the law of increasing costs"

Sample Answer

Understanding the Law of Diminishing Marginal Returns / Increasing Costs

This economic principle states that as you add more of one input (while holding other inputs constant), there will be a point where each additional unit of input results in smaller and smaller increases in output. Eventually, the output might even decrease.

• Increasing Costs: This is closely related. As you want to produce more output, you need to add more input. However, because of diminishing returns, each additional unit of output becomes more expensive (in terms of the input required). For example, to get the next point of understanding, you might need to study for longer than the study time it took to get the previous point of understanding.

Applying it to Studying This Course

Let's define our terms:

• Input: Your study time (hours spent reading, reviewing notes, doing practice problems, etc.).
• Output: Your level of understanding, knowledge retention, or potential grade improvement.

How Might You Know You Are at a Point of Diminishing Returns?

Initially, when you start studying:

1. Increasing Marginal Returns: The first few hours of studying are very productive. You learn foundational concepts, clear up major confusion, and feel like you're making significant progress. Each hour adds a lot to your understanding (high marginal return).

1. Diminishing Marginal Returns: After several hours (or maybe even days), you start to notice:
   • Slower Progress: You're going over material you already know, struggling to grasp new nuances, or finding it harder to remember new information.Understanding the Law of Diminishing Marginal Returns / Increasing Costs