Question

Define Marginal Product. State the behaviour of Marginal Product when only one input is increased and other inputs are held constant.

Answer 1

Marginal Product refers to the addition to Total Product, when one more unit of a variable factor is employed. It is calculated as MP_n = TP_n – TP_n-1

The behaviour of MP, when only one input is increased and other inputs are held constant can be explained below with the help of schedule:

               Law of Variable Proportions

The table shows that as more and more units of labour are combined with fixed amount of land, MP (Marginal Product) tends to rise till 3 units of labour are employed. In this situation, TP (Total Product) increases at the increasing rate. This is a situation of increasing returns to the factor. But, with the application of 4th unit of labour, situation of diminishing returns sets in where MP starts decreasing and TP increases only at the decreasing rate. Diminishing MP reduces to zero when 7 unit of labour is added, and MP becomes negative (-1) when 8th unit of labour is also employed. Total output is maximum (= 15), when marginal output is zero and it starts declining (from 15 to 14) when marginal output = - 1 (negative).