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MENTAL MODEL · M9883

Law of Diminishing Returns

Law of Diminishing Returns
BusinessHigh supportEconomics
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Version 1.0.0 · Updated 2026-07-30

CORE DEFINITION

When other factors are fixed, continuously increasing the input of a certain factor will eventually lead to diminishing marginal output.

SCAFFOLDING EFFECT

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Reduce cognitive load

Identify investment inflection points. Avoid over-investing in areas where returns have already flattened.

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Anchor fast decisions

The law of diminishing returns states that when other inputs remain unchanged, continuously increasing a certain variable input will eventually cause the marginal output to decline. It characterizes the boundary of factor allocation under constraints and explains why one cannot simply rely on piling up one resource.

MINIMUM ACTION

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Source support: Explicit

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    en.wikipedia.orghttps://en.wikipedia.org/wiki/Diminishing_returnsZH · Explicit
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