Marginal product is a way of figuring out how much more stuff you can make if you use one more thing, like adding another worker or machine. Imagine you’re making cookies, and you have 3 friends helping. If adding a 4th friend lets you make 10 more cookies, then that extra 10 cookies is your marginal product.
What’s on This Page?
This page has a calculator to find marginal product, easy formulas, step-by-step instructions, examples, and questions and answers to help you understand marginal product.
Calculator
Formula
Marginal Product (MP) = Change in Quantity Produced (ΔQ) ÷ Change in Quantity of Labour (or other input) (ΔL)
Where:
- Marginal Product (MP) is the increase in production from producing one extra unit
- Change in Quantity Produced (ΔQ) is the change in production over a specific time period
- Change in Labor (or other input) (ΔL) is the change in labour in a specific time period. This does not have to be labor – it can be any input metric (capital is often used).
How to Calculate Marginal Product Step by Step
Step 1 – Find the change in how much you made (ΔQ). This is how much more stuff you made when you added an extra input.
Step 2 – Find the change in input (ΔL). This is the number of extra inputs or new things you used.
Step 3 – Divide the change in how much you made by the number of new inputs to get the marginal product.
Example
A factory had 10 workers making 100 toys. When they added 1 more worker (so now 11 workers), they made 120 toys.
Step 1: Find the change in how much you made: 120 toys – 100 toys = 20 toys.
Step 2: Find the change in input: 11 workers – 10 workers = 1 worker.
Step 3: Calculate marginal product: 20 ÷ 1 = 20.
Result: The marginal product is 20, which means the extra worker helped make 20 more toys.
What is Marginal Product?
Marginal product is how much more you make when you add one or input. It helps you see how useful that extra input is. At first, adding more inputs makes a lot more things, but after a while, adding too many can mean less extra stuff is made.
Average Product vs. Marginal Product
Marginal product is how much extra stuff one new unit of labour or input to production makes.
Average product is how much stuff each unit of labour or input to production makes on average.
Marginal Cost vs. Marginal Product
Marginal cost is how much more it costs to make one more thing.
Marginal product is how much more stuff you make when adding an input.
When marginal product goes up, marginal cost usually goes down, and when marginal product goes down, marginal cost usually goes up.
Marginal Revenue vs. Marginal Product
Marginal revenue is the extra money you make from selling one more thing.
Marginal product is the extra stuff you make with one unit of input.
Businesses want to make sure the extra stuff they make (marginal product) helps them earn more money (marginal revenue) than it costs.
Total Product vs. Marginal Product
Total product is all the stuff you’ve made.
Marginal product is just the extra stuff you make by adding one more input.
Tables
Marginal product, based on an increase of 1,000 hours of hourly labor
| Change in Units | Marginal Product |
| 1 | 0.001 |
| 10 | 0.01 |
| 100 | 0.1 |
| 500 | 0.5 |
| 1,000 | 1 |
| 5,000 | 5 |
| 10,000 | 10 |
| 25,000 | 25 |
| 50,000 | 50 |
| 100,000 | 100 |
Marginal product, based on an increase of 1,000 units in quantity
| Change in Labor (hours) | Marginal Product |
| 1 | 1,000 |
| 10 | 100 |
| 100 | 10 |
| 250 | 4 |
| 500 | 2 |
| 1,000 | 1 |
| 5,000 | 0.2 |
| 10,000 | 0.1 |
| 100,000 | 0.01 |
| 1,000,000 | 0.001 |
FAQs
Q: Can marginal product increase indefinitely?
A: No. Marginal product will eventually decrease due to diminishing returns, where each additional input adds less to total output.
Q: What causes marginal product to become negative?
A: Marginal product becomes negative when adding more input reduces total output, usually due to overcrowding or resource overuse.
Q: How does marginal product relate to total product?
A: Marginal product drives the rate of change in total product. When marginal product is positive, total product increases, but as marginal product falls, the rate of total product growth slows.
Q: Is marginal product always decreasing?
A: No. At low levels of production, marginal product will initially increase. It eventually decreases due to the law of diminishing marginal returns.
Q: What is the relationship between marginal product and productivity?
A: Marginal product reflects the efficiency of an additional input, while overall productivity is influenced by the average product of all inputs.
Q: What happens when marginal product is zero?
A: When marginal product is zero, total product has reached its maximum, and adding more input will not increase output.
References and Resources
- Khan Academy. (n.d.). Total product, marginal product, and average product. Retrieved from https://www.khanacademy.org/economics-finance-domain/ap-microeconomics/production-cost-and-the-perfect-competition-model-temporary/the-production-function/v/total-product-marginal-product-and-average-product
- Marginal Revolution University. (n.d.). Marginal product of labor. Retrieved from https://mru.org/courses/principles-economics-microeconomics/labor-economics-marginal-product-labor
- Nicholson, W., & Snyder, C. (2007). Microeconomic theory: Basic principles and extensions (10th ed.). Thomson South-Western.
- OpenStax. (2018). Principles of microeconomics 2e. OpenStax. Retrieved from https://openstax.org/details/books/principles-microeconomics-2e
- Pindyck, R. S., & Rubinfeld, D. L. (2013). Microeconomics (8th ed.). Pearson.
- Varian, H. R. (2010). Intermediate microeconomics: A modern approach (8th ed.). W.W. Norton & Company.
- YouTube. (2020, February 20). Micro: Unit 3.1 — Marginal product and diminishing returns. Retrieved from https://www.youtube.com/watch?v=CHBepmJNil0
- BYU-Idaho. (n.d.). ECON 150: Microeconomics – Lesson 6: Production functions. Retrieved from https://courses.byui.edu/econ_150/econ_150_old_site/lesson_06.htm