Law of Diminishing Returns; where does it kick in?

Personally :
$1k for amp (integrated perhaps best at this cost point)
$2k for speakers
$500 for CD
$1k for turntable (inc phono pre)
$200 for collection of homebrew cables
$5k for source material CD/vinyl (not mentioned in previous posts)
Maybe I'm a cheapskate ? Maybe tone deaf. Or perhaps I just prefer spending time with the family listening to my system vs hours at work required to to (legally) earn the money for a $100k system.

Perceived Return(PR) on $$$ spent for audio rises steadily at a 45 degree angel until it hits your Ear Level(EL), then divide by the square root of your Annual Income (AI).

PR=EL/AI

Very early in commercial gear, as it must due to the distribution chain and all that advertising to pay for.

No, I'm not saying that it's all a rip-off, I have been involved in manufacturing electrical appliances at the R&D level, so I understand the cost structure involved.

That is why I build my own or modify second hand gear. I would sooner pay 100% too much for a good quality resistor or capacator (which is reasonable considering the sort of inventory a parts supplier needs to carry - at US$2.50-5.00 for a good resistor to buy in, that's a lot of money folks) than a 1,000% too much for the same component in a commercial product!

Sure, it takes time and it takes even more time to learn what is good and what is not. But for me, that makes it even more fun!

Anyway, good sound has been around for a long time now. Some of the clasic designs, mostly tube admittedly, sound really good with modern components.

The use of high speed soft recovery diodes in power supplies alone (that are available these days), can really improve the sound of some older gear. Also the better capacators such as Silmic, Black Gate, Muse and Cerafine all work wonders.

So, my advice is find some good, but not extravagant second hand gear and learn how to "modernise" it with high quality components.
Just make VERY SURE you learn about the safety aspects of working with electricity. Like a gun or a car, it is not dangerous in and of itself - but ignorance can be (and often is) FATAL.
Electrocution is not fun, I found out the hard way due to a faulty domestic fan. I have never had a shock from audio gear as I am VERY carefull not to. Once was too much.

Just find a like minded soul and learn. Plenty is on the web also.
A search for kits will also turn up a lot. It is the metalwork that is the hardest bit really - all done for you in a kit!

I believe that is the best way to get bang for the buck and to push the limits more before the diminishing returns really kick in.
I am just in the process of purchasing some Audio Alchemy gear (DTI 32 pro, DDE3, MPS and transport) through Audiogon.....
The adventure continues!

I'm a relatively newby to the more mid range Hi-fi equipment so what I'm about to say may stroke some of you out with my stupidity and inexperience. I have a yamaha rx-v3000 reciever with two front B&W cm4s and two bose speakers high on the wall for the backs just to let you know where I'm coming from. It appears that it is the quality of the recording that will make speakers sit up and sing after you get past a certain price level. I have had recordings that sound unbelievable and some that are poor. I don't think there is any equipment that will make some poorly engineered disc or vinyl sound good. The demo cd that was used at first to audition the speakers that I have would put the group in front of you. Therefore you must surmise that one recorded in a similar manner would produce the same.... No amp, no preamp, and just 100 watts going out to the speakers. I think that 2500.00 to 3000.00 dollars won't get you perfection but can make you satisfied...if you can be. Now correct me if I'm wrong. My E-mail is listed.

Many have rightly pointed out that diminishing returns can occur for different people at different levels of time or money. It also appears that, short of $250,000 retail, incremental sound quality improvements do continue. For me, returns on investments drop dramatically at the price point where my wife and friends think I've gone crazy! Fatparrot's doubling hypothesis works for me. At $10,000, things were good and I couldn't justify more -- I was happy. After a while, my wife began to accept my illness and I got more sophisticated (sicker?) and was able to move to $20,000. Now my wife knows I'm nuts and I'll have to wait a long time to get to $40,000. Of course, I can't justify that to myself right now. Maybe I should spend a few thou on some tweaks though ...