More often that not, this added worker makes existing workers more productive. It means that having this person employed by the firm causes total product to increase by 25 tacos. Does this mean the last worker personally produces 25 tacos? No, not at all. ![]() That is, how much does total product change by adding the last unit? If, for example, the marginal product of labor is 25 tacos, then this means that employing the last worker causes total product to increase by 25 tacos. The proper economic interpretation of marginal product is as the contribution of the last unit of variable input to total production. The formula for specifying and calculating marginal product from total product is given as: Of the myriad of short-run production-related terms (including total product, average product, fixed input, variable input, short run, long run) marginal product is by far the most important. Marginal product lies at the very foundation of the analysis of short-run production, playing THE critical role in the explanation of the law of supply and the upward-sloping supply curve using the law of diminishing marginal returns. Marginal product is the extra output generated by an extra input. Marginal product, which occasionally goes by the alias marginal physical product (MPP), is one of two measures derived from total product. ![]() Marginal product, usually abbreviated MP, is found by dividing the change in total product by the change in the variable input. MARGINAL PRODUCT: The change in the quantity of total product resulting from a unit change in a variable input, keeping all other inputs unchanged. In fact, inventories are frequently termed "working capital." Inventory changes are considered investment because firms need inventories to smooth the flow of production and sales just like they need factories and equipment to produce goods. Change in business inventories is NOT what most people think of when the topic of business investment arises. This is one of two main categories of gross private domestic investment included in the National Income and Product Accounts maintained by the Bureau of Economic Analysis. ![]() AmosWEB means Economics with a Touch of Whimsy!ĬHANGE IN BUSINESS INVENTORIES: The increase or decrease in the stocks of final goods, intermediate goods, raw materials, and other inputs that businesses keep on hand to use in production.
0 Comments
Leave a Reply. |