Concept of total product (TP) Average product (AP) and Marginal Product (MP)
Total Product (TP)
Total product is the total amount of goods and services produced with the given set of inputs in a given time period. In other words, it is the sum of marginal products. It can be also obtained by multiplying average products of variable factor by its units.
TP= Σ MP
TP=AP × L
Initially, the total product increases at an increasing rate up to a certain limit. After that, it increases at a decreasing rate, becomes maximum and begins to fall down. It can be explained by the help of total product schedule and diagram:
|Units of labor (L)||Total product (TP)|
In the above schedule, the total product increases up to the 3rd unit of labor. When the 5th unit of labor is employed, TP becomes maximum. By the employment of the 7th unit of labour, it began to decline. It can be expressed with the help of the following diagram:
In the above figure total product and units of labor are shown along y-axis and x-axis respectively. TP curve increases at an increasing rate up to point A. It increases at a decreasing rate up to point B. It is maximum from point B to C. Beyond point C, it starts to decline.
Average product (AP)
Average product is the per unit product of the variable factor. In other words, it is obtained by dividing the total product by the total units of labor (variable factor).
AP = TP/L
Initially, AP increases at a slower rate become maximum and diminishes. It can be shown by the help of following average product schedule and diagram:
|Units of labor (L)||Total Product (TP)||Average Product (AP)|
In the above table units of variable factor (labor), total product and average product are shown. Average product is calculated dividing the total product by units of labor. Average Product increases at a decreasing rate become maximum and then declines. It can be shown by the help of the following diagram:
In the above diagram, the average product and units of labor are shown along y-axis and x-axis respectively. AP curve increases from O to A at a decreasing rate. At point A and B, AP becomes maximum. AP curve starts to fall beyond point B.
Marginal product (MP)
Marginal product is the change in the total product due to the change in variable factor. In other words, Marginal product is the addition to the total product by the employment of an additional unit of a variable factor.
MP = TPn – TPn-1
MP = ΔTP/ ΔL
MP= marginal product
TP = total product
n = number of the variable factor
∆TP= change in total product
∆L= change in the units of labor
Initially, the MP curve rises reach a maximum point, then starts declining touches x-axis and even reaches a negative point. It can be explained by the Marginal product schedule
|Units of labor (L)||Total product(TP)||Marginal product(MP)|
In the above schedule units of labor, total product and marginal product are shown. Marginal product calculated dividing the change in the total product by the change in units of labor. It increases at first, becomes maximum, then starts to decline and even becomes negative. It can be shown by the help of the following diagram:
In the above figure, marginal product and units of labor are shown along y-axis and x-axis respectively. Marginal product rises from origin up to point A. At point A, MP is maximum. Beyond point A, MP starts falling, touches x axis at point B and then declines to the negative axis.