Concept of total product, marginal product and average product
The concept of total product, marginal product and average product is very important in economics. Let us discuss them one by one:
TOTAL PRODUCT (TP): It is the sum total of output produced by all the units of variable factor along with the fixed factors of production.
TP=50+70+80+80+60=340 UNITS OF A COMMODITY (Refer below table)
MARGINAL PRODUCT (MP): It is the addition made to total product by using one more unit of variable factor.
MP= 70-50= 20 UNITS (Refer below table)
AVERAGE PRODUCT (AP): it is the output per unit of variable factor.
|LABOUR||TOTAL PRODUCT||AVERAGE PRODUCT||MARGINAL PRODUCT|
The above table is showing that the total product is 50+70+80+80+60=340. Average product is calculated by using formula AP= TP/L and marginal product is calculated by using formula MP= TPn-TPn-1
Which shows that marginal product is falling then becomes zero and thereafter it becomes negative.
The table shows that: i) as long as MP is increasing the TP is also increasing at increasing rate.
ii) When MP starts diminishing, TP increase at diminishing rate.
iii) When MP=0 there is no addition to TP.
iv) When MP is negative, TP starts falling.
I hope you have understood the concept of total product, marginal product and average product