Marginal Product

Published Jan 3, 2023

Definition of Marginal Product

The marginal product is defined as the additional output that is produced by adding one more unit of a particular input. That means it is the increase in output that results from increasing the quantity of one input, while keeping all other inputs constant.

Example

To illustrate this concept, let’s look at a factory that produces car parts. The factory has a fixed number of machines and workers. To increase the output of the factory, the management decides to add one more machine. As a result, the output of the factory increases. The additional output that is produced by adding one more machine is called the marginal product.

Why Marginal Product Matters

The marginal product is an important concept in economics because it helps to determine the optimal level of production. That means it helps to identify the most efficient combination of inputs that will produce the highest output. In addition, it is also used to calculate the marginal cost of production, which is the additional cost of producing one more unit of output. This is important for businesses, because it helps them to determine the most cost-effective way to produce their goods and services.