Total Product:
Total product of a factor is the amount of total output produced by a given amount of the factor, other factors held constant. As the amount of a factor increases, the total output increases. It will be seen from Table 16.1 that when with a fixed quantity of capital (K), more units of labor are employed total product is increasing in the beginning.
Thus, when one unit of labour is used with a given quantity of capital 80 units of output are produced. With two units of labour 170 units of output are produced, and with three units of labour total product of labour increases to 270 units and so on.
After 8 units of employment of labour total output declines with further increase in labour input. But the rate of increase in total product varies at different levels of employment of a factor. Graphically the total product curve is shown by TP curve in Fig. 16.1. It will be seen that in the beginning total product curve rises at an increasing rate, that is, the slope of the TP curve is rising in the beginning.
After a point total product curve starts rising at a diminishing rate as the employment of the variable factor is increased. The fact that ultimately total product increases at a diminishing rate has been proved by empirical evidence, as shall be seen later in our discussion of the law of diminishing returns.
Average Product:
Average product of a factor is the total output produced per unit of the factor employed. Thus,
Average Product = Total Product/Number of units of a factor employed
