What is marginal product, and what is meant by
diminishing marginal product?
Marginal Product is the Total Product's addition by adding one variable input unit, keeping all other inputs constant.
MP of factor 1 can be written as;
Where,
or,
The Law of Diminishing Marginal Product or the Law of Variable Proportion is a short-run production function. In the short run, the producer can change the quantity of output only by changing the variable factors.
The Law of Diminishing Marginal Product or the Law of Variable Proportion explains the change in total output when one variable input is changed, and other inputs are kept constant. This is also called Returns to a Factor.
Law of Variable proportion states that when more and more variable factor units are added with fixed factors, initially TP increases at an increasing rate, then increases at a diminishing rate, and finally starts to decline.
If we express in terms of MP, the Law states that when the quantities of a variable factor are added with fixed factors, initially MP increases, then falls, and finally starts to decline.
This is called the Law of Diminishing Marginal Product.
Step by step
Solved in 3 steps
