Chapter 14

Exponential Growth and Diminishing Returns

In an exponential growth system, a linear set of steps calls for an ever-increasing amount of input or output. A good real-world example of this is in the speed of cars. In general, a faster car costs more money. But the speed and cost of cars almost never increase at the same rate. Instead, you must pay ever-increasing amounts of money to get a car that is only slightly faster. So for each mile per hour faster you want to go, the speed gets increasingly more expensive. This type of increase is called exponential growth. On the flip side, the top speed of the car you are paying for gets smaller per dollar. Such a decrease in the marginal (incremental) output of a production process as the ...

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