The law of diminishing marginal product states that if we keep increasing the employment of an input assuming that other inputs are fixed the marginal product will increase only up to a particular level and then will start falling. Law of diminishing returns suggests that the stage where the return to inputs starts diminishing is the ultimate stage.

In the initial stages as we increase the quantity of variable factors the total output will increase at an increasing rate and the marginal product will also increase.

In the next stage as we increase the quantity of variable factors the total output will increase at a decreasing rate but the marginal product will increase.

But once the total output is constant, that is there is no change in the total output with any change in the variable factor, the marginal product will be zero.

When the total output decreases with increase in variable factor the marginal product will be negative.

Let’s understand it with help of following product schedule and the graph –

Now, we will represent this data on graph –