At times in a person's life actual production can exceed what people see as their potential production for short periods.  Why does this occur only for brief periods?

1 Answer | Add Yours

pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

Both individual people and actual businesses can only sustain “excessive” production for a short time because the costs of such production are high and cannot be maintained over the long term.

Let us think, for example, of a college student who needs to get a paper finished.  This student might work all night, getting 10 pages written in 8 hours.  However, the costs to the student are high.  The student cannot possibly keep doing that day after day as they will “burn out” due to lack of sleep and recreation.  As another example, let us think of a person who is working a great deal of overtime.  The person becomes more productive, but also incurs costs.  They become tired.  They lose touch with their family as they keep having to work overtime.  The stress on them personally and on their relationships becomes too high to sustain.  This kind of extra workload can be managed for a short time but cannot last over the long term.

In economics, this idea helps us to understand the law of decreasing marginal returns and increasing costs.  A firm, like a person, can work above its capacity for a short while, but soon it has to scale back as it pays out too much in overtime and as it needs to do things like reduce production to allow for maintenance. 

We’ve answered 317,598 questions. We can answer yours, too.

Ask a question