Total Product and Marginal Product

1
Total Product and Marginal Product
Quantity of jeans
Kalvin Clein has begun a small business producing
jeans. Below is the production function, based
on a fixed production facility and fixed amount
of capital equipment.
The production table gives the relationship
between the variable input, labor, and the
maximum number of jeans which can be
produced. The total product curve shows the
relationship between labor and the quantity of
jeans produced.
The extra output produced from an additional
worker is the marginal product of labor. The
marginal product curve illustrates this
relationship. Note the marginal product is
simply the slope of the total product curve.
Notice that as the number of workers increase,
the total output increases. However, total
product (or output) does not increase at a
constant rate. Initially, this marginal
productivity increases because of division of
labor and specialization.
However, very quickly this marginal productivity
decreases (law of diminishing returns). Marginal
product falls since there is less capital
equipment for the additional workers use.
Total Product
I
H
Total product increases at a decreasing rate
G
F
E
Adding a 7th worker increases output by 3 jeans
D
C
Adding a 2nd worker increases output by 16 jeans
B
Quantity of Labor
Quantity of Jeans
Marginal Product
A
Quantity of labor (workers)
Marginal Product jeans / worker
A 0 0
10
Marginal product increases initially, but very
quickly it decreases as more workers are
employed.
B 1 10
16
C 2 26
13
D 3 39
11
Point of diminishing returns
E 4 50
8
F 5 58
Marginal Product
5
G 6 63
3
H 7 66
1
I 8 67
Quantity of labor (workers)