Marginal Product Of Labor

Published Jan 2, 2023

Definition of Marginal Product of Labor

The marginal product of labor (MPL) is defined as the additional output that is produced by adding one additional unit of labor. That means it is the increase in output that results from employing one more worker or putting in one more hour of work, etc.

Example

To illustrate this, let’s look at a small imaginary factory that produces widgets. The factory currently employs 10 workers and produces 1,000 widgets per day. Now, if the factory hires one more worker, the output increases to 1,100 widgets per day. Thus, in that case, the MRL  is 100 widgets per day.

Why Marginal Product of Labor Matters

The marginal product of labor is an important concept in economics, as it helps to determine the optimal level of employment for a firm. That means it helps firms to decide how many workers they should hire in order to maximize their profits.

In addition to that, the MRL is also closely related to the marginal cost of labor, which is the additional cost incurred by hiring one more worker. This is important for firms, as it helps them to determine the optimal level of employment and make sure they run their business at a profitable scale.