1.2.5.1.4 Total product, average and marginal products

Total product (TP), average product (AP), and marginal product (MP) are concepts used in the theory of production to describe the relationship between the quantity of inputs (usually labor) and the resulting quantity of output. These concepts are crucial in understanding how changes in input levels affect the level of production.

1. Total Product (TP): Total product (TP) refers to the total quantity of output produced by a firm using a given amount of inputs (usually labor) during a specific time period, while keeping all other inputs constant. TP is a measure of the overall production level resulting from the combination of inputs. It shows how the output varies as more units of input are added.

Mathematically, total product can be represented as follows: TP = f(L)

Where:

• TP = Total Product
• L = Quantity of the variable input (usually labor)

As more units of the variable input are added, the total product typically increases at a diminishing rate due to the law of diminishing marginal returns.

2. Average Product (AP): Average product (AP) is the average output produced per unit of the variable input (usually labor). It measures the efficiency of labor in producing output.

Mathematically, average product can be calculated as follows: AP = TP / L

Where:

• AP = Average Product
• TP = Total Product
• L = Quantity of the variable input (usually labor)

Average product initially increases as more units of the variable input are added, but it reaches a maximum and then starts to decrease. The point where average product is maximized coincides with the point where marginal product equals average product.

3. Marginal Product (MP): Marginal product (MP) refers to the additional output produced by adding one more unit of the variable input (usually labor), while keeping all other inputs constant. Marginal product measures the rate of change in total product resulting from a change in the quantity of the variable input.

Mathematically, marginal product can be calculated as follows: MP = ΔTP / ΔL

Where:

• MP = Marginal Product
• ΔTP = Change in Total Product
• ΔL = Change in the quantity of the variable input (usually labor)

Marginal product initially increases as more units of the variable input are added, but it eventually starts to diminish due to the law of diminishing marginal returns. The point where marginal product equals zero corresponds to the point where total product is maximized.