Marginal product is an economics concept that helps firms understand how changes in input levels affect their output. Understanding marginal product can help businesses optimize their production process and improve profitability.

This page provides an overview of marginal product, including a calculator, its formula, step-by-step calculation method, examples, detailed explanations, and FAQs.

## Calculator

## Formula

The marginal product (MP) formula is:

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

**Find the change in total output**: Find the difference in the number of goods produced before and after the addition of an input unit.**Find the change in input**: Find the increase in the number of input units (usually this is labour, but it can be any input).**Apply the formula**: Divide the change in total output by the change in input to find the marginal product.

##### Example

If a factory increases its labor from 10 workers to 11 and production increases from 100 units to 120 units. The marginal product is calculated as:

**Step 1 – Find the change in total output:**

120 units – 100 units = a change of 20 units

**Step 2 – Find the change in input units:**

11 workers – 10 workers = a change of 1 unit

**Step 3 – Apply the formula**

MP = 20 ÷ 1 = 20 units

This means that adding the 11th worker contributed 20 extra units to the total output.

## Definition – What is Marginal Product?

Marginal product measures the additional output generated by adding one more unit of a particular input, like labor or capital.

It is help understand how efficiently resources are being used in production.

Marginal product tends to rise initially but eventually falls due to diminishing returns.

In the example of a factory that is under capacity, adding an extra worker to an assembly line may help increase production far more than the cost of paying that worker.

In an example of a factory that is far over capacity, adding an extra worker to the line may cause very little extra production to happen, because the factory is so crowded.

##### Average Product vs. Marginal Product

Marginal product measures the additional output from adding one more unit of input, while average product is the total output divided by the total number of inputs.

Marginal product reflects the efficiency of the last unit added, whereas average product gives an overall view of productivity per input used.

##### Marginal Cost vs. Marginal Product

Marginal Cost (MC) measures the additional cost incurred when producing one more unit of output. While marginal product focuses on the output side (how much extra a firm produces by adding resources), marginal cost relates to the input cost side (how much it costs to produce extra). Generally, as marginal product increases, marginal cost decreases and vice versa.

##### Marginal Revenue vs. Marginal Product

Marginal Revenue (MR) is the extra revenue gained from selling one more unit of a product. Marginal product measures the output generated by an additional input. Understanding both helps firms make decisions on how much to produce and at what input levels to operate.

##### Total Product vs. Marginal Product

Total Product (TP) refers to the total output produced with a given amount of input. Marginal product looks at the incremental change in output. TP increases as long as MP is positive but starts to increase at a decreasing rate when diminishing returns set in.

## 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