A firm chooses its output level, QS, through the choice of inputs.The relationship between inputs and outputs is determined by the production technology used by the firm, but the general relationship assumed to be positive. That is, as you increase the level of inputs (like labor and materials), output will increase.
But it is also generally assumed that there are diminishing returns to any input.
Why is this?
What is the explanation for this phenomenon?
Please give me an example that demonstrates the principle of diminishing returns of inputs.