What is the 'Law of Increasing Return'?

Updated: 4/28/2022
User Avatar

Wiki User

βˆ™ 8y ago

Best Answer

Assuming this is pertaining to economics or technology and not some other scientific field:

The much more popular concept is the "law of diminishing return", which states that beyond some point, each additional unit of variable input yields less and less additional output. A simple example: Let's say you have a factory with a fixed physical size making a fixed product. If you add one employee to the factory, you'll expect an increase in x of units produced. However, if you add 100 employees, instead of an increase in 100*x in units produced, it will be less than that. This is because eventually the new employees will become overcrowded in the factory and have nothing to do since the factory's machines are already being used at peak efficiency, therefore for each new employee added you're getting less "bang for your buck" (lower marginal returns).

The "law of increasing returns" would imply just the opposite, that each additional variable added leads to a disproportionately high return. The law of diminishing returns is much more widely-known and is thought to be a near-universal law. There's a lot less research material available in terms of the law of increasing returns, however there are cases where it could hold true. The example listed on Wikipedia is of fax machines - adding one fax machine will create x in return, however adding 2 fax machines means that they can communicate and therefore increase return higher than would be possible by just 2*x, and marginal returns would be even higher for adding more fax machines.

For more on diminishing returns, and a short section on how increasing returns are possible but by no means a universal law.

User Avatar

Wiki User

βˆ™ 8y ago
This answer is:
User Avatar
Study guides

selection process for all federal judges

appellate jurisdiction vs original jurisdiction in federal courts

what term describes the view that only fundamental bill of rights protections should apply to the statesΒ 

what had Benjamin Gitlow been convicted for in the supreme court case GitlowΒ  VS New York

See all cards
555 Reviews

Add your answer:

Earn +20 pts
Q: What is the 'Law of Increasing Return'?
Write your answer...
Still have questions?
magnify glass
Related questions

What is increasing in Hooke's law?

Hooke's law is about proportionality. So whatever is increasing can also be decreasing.

Explain the law of increasing return?

In economics, the law of increasing return is also known as the network effect. This explains the positive effect a user of a product has on the value of said product as it pertains to other people. Namely, the more people that use a product, the more valuable it is. A prime example is internet access. The more people who have internet access, the more people will want or need internet access to communicate with those people.

How does Increasing return affect productivity?

I dont know

What is syntax law?

sintax law is increasing the price of alcohol and cigarretes.

What generates the law of increasing opportunity costs?

The law of increasing opportunity costs states that the more of a product that is produced the greater is its opportunity cost.

The Law of Return brought an increase in Israel's?

The Law of Return allowed for an increase in Israel's Jewish population.

The law of increasing costs means that when an economy increases the production of one item .?

what law of increasing costs means that when an economy increases the production of one item _____.

When the elements are arranged by increasing atomic number there will be a periodic repetition of their prop?

The periodic law states that when the elements are arranged by increasing atomic number, there will be periodic repetition.

Who is law was it that the idea that the volume of a gas increases with increasing temperature provided the pressure does not change?

Charles' law

Which gas law describes the volume of a balloon increasing on a mountaintop?

Boyle's Law which relates volume to pressure.

Is it the law that doctors return telephone calls from their patients?

What the law requires depends on the country and locality in which you are located, but in general there is no law requiring doctors to return telephone calls from their patients.

What is the Jewish law of return?

Israel's law of return guarantees citizenship to all Jews. (There are issues and debates about the definition of who is a Jew, and how you prove you are Jewish.)