Introduction

To demonstrate the law of diminishing returns, we will use the marginal product for Blaker Maker that we calculated previously.

The marginal product is indicated on the vertical axis, while the number of workers (labour) is indicated on the horizontal axis.

Marginal product for Blaker Maker

Variable input
labour		 Total product (TP) Marginal product (MP)
0 0 ---
1 500 500
2 1 500 1000
3 3 000 1500
4 4 000 1000
5 4 500 500
6 4 750 250
7 4 750 0
8 4 500 -250

Joining the points axis gives us our marginal product curve for Blaker Maker.

If you look more closely at the diagram, you will notice that the marginal product increases up to the third worker, it then decreases until the seventh worker and then becomes negative.