Marginal product is referred to as the additional product that is produced as a result of adding an additional unit of input. In other words, a change in the production output due to a change in the production input is known as marginal product.
The change obtained in the output is done by changing only the input, whereas all other factors of production such as land and capital remain unchanged.
It plays an important role in the analysis of short-run production. Its role is critical in understanding the law of supply. Marginal product is the most important short-run production term.
The mathematical representation of marginal product formula is as follows:
Marginal product = Change in output/Change in input
Or, Marginal product = ∆TP/∆L
Or, Marginal product = [Qn – (Qn – 1)]/[Ln – (Ln – 1)]
Qn = Total production at time n
Qn – 1 = Total production at time n – 1
Ln = Total units at time n
Ln – 1 = Total units at time n – 1
Marginal product helps companies determine the increase in production that results from the addition of a unit of labour. The objective is to employ a sufficient workforce with which maximum productivity and revenue can be generated.
This was all about the marginal product formula, which is a very important concept to determine the law of supply. For more such interesting concepts on economics for class 12, stay tuned to our website.