Question

In: Economics

Explain the difference between total product, marginal product and average product.

Explain the difference between total product, marginal product and average product.

Solutions

Expert Solution

Total product is the total quantity of output produced by a firm in the given outputs. As the amount of labor goes up, the total output or total product goes up. Marginal product is the net change in total production by using the additional units of labor. Average product is defined as the product produced by every worker when we divide the total product by the variable inputs employed.

** When the marginal productivity reaches its maximum, the total product reaches its inflexion point, and from that point on, it increases but at a decreasing rate. Marginal productivity keeps going down, reaches zero, and then becomes negative. This is all due to the law of diminishing returns.

** If the law of diminishing does not happen, the marginal productivity never keeps going down or reach zero. Every effort to produce more would eventually be consumed without any decrease in utility. This would happens only if the utility remains constant or higher for every consumption of additional unit produced.

** Marginal product diminishes not because each additional worker who is hired is inferior to the previous worker, but because more workers are being used relative fixed plant and equipment that is available.

Average product is the total product divided by the input quantity used in the production of the total product. Or .Average product is the total product divided by the input quantity used in the production of the total product.

Average product- As the units of variable factor are increased ,Ap curve starts from the origin , increases at a decreasing rate , reaches a maximum and then starts falling , AP curve is inverted U shaped. As long as TP is positive ,AP is positive.


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