A principle of economics that states that if one factor of production is increased while others remain fixed, the resulting increase in output will level off after a time and then decrease. In other words, if a company decides to employ more workers but does not increase the amount of machinery it will eventually reach the point of diminishing returns, where the addition of each new worker will add progressively less to output than did the previous additions. To avoid diminishing returns the optimum relationship between all the factors of production at any given time must be evaluated.