Diminishing returns to an Input (diminishing marginal product) a diminishing returns to an input an increase in the quantity of an input leads to a decline in the marginal product of that input, holding the levels of all other inputs fixed a Other things held constant, as more of a variable input is used in production, its marginal productivity will decline after a certain point
Diminishing Returns to an Input (diminishing marginal product) ◼ diminishing returns to an input: an increase in the quantity of an input leads to a decline in the marginal product of that input, holding the levels of all other inputs fixed ◼ Other things held constant, as more of a variable input is used in production, its marginal productivity will decline after a certain point
Total Product, Marginal product and the Fixed Input (a) Total Product Curves (b)Marginal Product Curves Quantity Marginal of whea product of labor (bushels (bushels per worker 160 140 TP 120 050 100 TP 15 8000 10 2345678 Quantity of labor(workers) Quantity of labor(workers)
Total Product, Marginal Product, and the Fixed Input
Short-Run production some inputs are fixed a Total Product: Q=f(L, K,N, E) Total product of labor Q=f(L K,N, E fixed Marginal product of labor MP=dQ/dL Average Product of labor: APL=Q/L
Short-Run Production: some inputs are fixed ◼ Total Product: Q = f (L, K, N, E) ◼ Total Product of Labor: Q = f (L) (K, N, E fixed) ◼ Marginal Product of Labor: MPL= dQ / dL ◼ Average Product of labor: APL=Q/L
Short-Run production Q, AP, MP, and shift in Q LK 2345 25527490100 55112162198224 23456 83170247303342 108220325400453 125258390478543 137286425523598
Short-Run Production: Q, AP, MP, and shift in Q L \ K 1 2 3 4 5 1 25 52 74 90 100 2 55 112 162 198 224 3 83 170 247 303 342 4 108 220 325 400 453 5 125 258 390 478 543 6 137 286 425 523 598
K=1 TP=Q MP AP 25 25 25 123456 55 30 22.5 83 28 27.7 10825 27 125 25 13712 22.8
K=1 L TP=Q MP AP 1 25 25 25 2 55 30 22.5 3 83 28 27.7 4 108 25 27 5 125 17 25 6 137 12 22.8