Total, Average & Marginal Product – Relationships
In the short run, when one factor (say labour) varies while others are fixed, we study Total Product (TP), Average Product (AP) and Marginal Product (MP).
1. Total Product (TP)
Total Product is the total quantity of output produced by a given number of units of a variable factor, keeping other factors constant.
Example: Total units of wheat produced with different numbers of workers on a fixed land.
2. Average Product (AP)
Average Product is output per unit of variable factor.
Formula:
AP = TP / L
Where L = number of units of labour.
3. Marginal Product (MP)
Marginal Product is the additional output produced by using one more unit of variable factor, keeping other factors constant.
Formula:
MP = ΔTP / ΔL
4. Numerical Illustration
Suppose land is fixed and only labour varies.
| Labour (L) | Total Product (TP) | Average Product (AP) | Marginal Product (MP) |
|---|---|---|---|
| 0 | 0 | - | - |
| 1 | 10 | 10 | 10 |
| 2 | 24 | 12 | 14 |
| 3 | 39 | 13 | 15 |
| 4 | 52 | 13 | 13 |
| 5 | 60 | 12 | 8 |
| 6 | 63 | 10.5 | 3 |
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5. Relationship between TP, AP and MP
- When MP is rising, TP increases at increasing rate.
- When MP is falling but positive, TP increases at decreasing rate.
- When MP = 0, TP is maximum.
- When MP is negative, TP starts falling.
- AP rises when MP is above AP; AP falls when MP is below AP.
- AP is maximum when AP = MP.
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Exam Tip
A favourite theory question: "Explain the relationship between TP, AP and MP with a diagram." Always mention TP rising at increasing/decreasing rate, MP cuts AP at its maximum, and TP maximum when MP = 0.
6. Quick Revision Points
- TP = total output, AP = output per unit of labour, MP = extra output from one more unit of labour.
- When MP > AP → AP rises; when MP < AP → AP falls.
- MP becomes zero when TP is maximum.
- Understanding TP, AP, MP is necessary for Law of Variable Proportions.
7. Quiz Time 🎯
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