The law of increasing costs means that when you make more of one thing, it gets harder (and more expensive) to keep making it, and other things might get cheaper.
Imagine you have a lemonade stand, and you also sell cookies. At first, if you want to make more lemonade, you just add a little more sugar and lemon juice, easy peasy. But if you keep making more and more lemonade, you need more lemons, more cups, maybe even more time. Soon, it’s not so simple anymore.
What happens when you switch things up?
If you decide to make fewer lemonades and more cookies instead, that can also change the cost of your cookies. Maybe you had a big bag of flour for both, now you’re using most of it for cookies, so the next batch might need more money to buy new flour.
So, when you increase the amount of one thing (like lemonade), the costs go up, and sometimes other things (like cookies) get more expensive too. It’s like when you’re playing with your toys, if you spend all your time building a big tower, it might be harder to make a perfect race car later!
Examples
- A factory produces two types of shoes. To make more of one type, they have to use resources that could be used for making the other type.
- You’re cooking a meal with only two ingredients: rice and beans. If you want to add more rice, you might need to reduce the amount of beans.
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See also
- How are global supply chains being reshaped by current events?
- How are governments planning to address the global inflation surge?
- Are there fewer steps involved?
- Are Cheerios Good for Your Heart or Not?
- How do global supply chain disruptions impact the world economy?