Relationship Between Marginal Product And Average Product
Download as PPTX, PDF0 likes1,876 views
This document summarizes the relationship between marginal product and average product in production. It defines production, factors of production, and the production function. It then shows a table with varying amounts of labor and capital inputs and the corresponding total, average, and marginal products. The table demonstrates that average product increases when marginal product is greater than average product, decreases when marginal product is less than average product, and is at its maximum when marginal product equals average product. Finally, it presents a 3-stage model to further illustrate the relationship between marginal product and average product over varying levels of input.
Relationship Between Marginal Product And Average Product
- 1. SUBMITTED BY: REJUWAN AHMED MALIK PGDM – III SEMESTER-1ST, BATCH 2017-19 RELATIONSHIP BETWEEN MARGINAL PRODUCT AND AVERAGE PRODUCT
- 2. PRODUCTION PROCESS: COMBINING INPUTS OR FACTORS OF PRODUCTION TO ACHIEVE AN OUTPUT. FACTORS OF PRODUCTION: • LABOR • CAPITAL • TECHNOLOGY (remaining unchanged for the period of analysis) PRODUCTION PRODUCTION FUNCTION FOR TWO INPUTS: Q=f(K,L); where, Q = Output, K = Capital & L = Labor for a given technology The production function describes the relationship between inputs (i.e. Factors of production) such as capital and labor and the quantity of output that a firm can produce.
- 3. AMOUNT OF LABOUR (L) AMOUNT OF CAPITAL (K) TOTAL OUTPUT (Q) AVERAGE PRODUCT MARGINAL PRODUCT 0 10 0 - - 1 10 10 10 10 2 10 30 15 20 3 10 60 20 30 4 10 80 20 20 5 10 95 19 15 6 10 108 18 13 7 10 112 16 4 8 10 112 14 0 9 10 108 12 -4 10 10 100 10 -8 APPLICATION
- 4. RELATIONSHIP BETWEEN TP, MP & AP A TP AP MP X Y Z B C Units of variable inputs per period of time Units of variable inputs per period of time Quantity of output per period of time Quantity of output per period of time OBSERVATIONS • LEFT OF Y, MP>AP & AP IS INCREASING • RIGHT OF Y, MP<AP & AP IS DECREASING • AT Y, MP = AP & AP IS AT ITS MAXIMUM • AT X, MP IS MAXIMUM
- 5. 3 STAGE MODEL Average Product Marginal Product STAGE I STAGE II STAGE III
- 6. THANK YOU