Tuesday, July 5, 2011

How does one calculate marginal physical product?Does he do change in output divided by change in labor, or is it the change in output that results...

Marginal physical product (MPP), also called marginal product, is:



the extra output resulting from 1 extra unit of a specified input when all other inputs are held constant. (Samuelson and Nordhaus)



The marginal physical product can be calculated for any factor of production and not just labour.


To calculate the marginal physical product of a factor of production for a given combination of all factors of production and the resultant production, we can increase the the quantity of the particular factor of production by exactly 1 unit and find out the corresponding increase in production. This additional quantity of production is the marginal physical product.


It is not necessary to increase the quantity of a factor of production exactly by 1 unit to find out marginal physical product. We can find out the increase in production corresponding to any small increase in the quantity of factor of production. In such cases the the marginal physical product is calculated as net increase in production quantity divided by net increase in factor of production input quantity.


Source:



Samuelson P.A. and Nordhaus W.D., 2005, Economics, Eighteenth Edition, Tata Mcgraw-Hill, New Delhi.


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