There are three concepts relating to production of a commodity.
TP refers to the total quantity of output of a commodity at a particular level of employment of an input, say labour, when the employment of all other inputs is unchanged. TP can be increased or decreased by increasing or decreasing the units of labour. So, amount of TP directly depends upon amount of labour employed. Because it can be changed, labour is called variable factor.
AP is the output per unit of a variable input, say labour. It can be obtained by dividing TP by the number of units of a variable factor.
AP = TP/L
where L is the number of units of labour input.
MP is defined as increase or decrease in TP resulted due to addition of one extra unit of labour, keeping all other inputs unchanged. In order to increase output or TP we have to increase the employment of labour by 1 or more number of units. The smallest number by which labour can be increased is 1. Since ‘marginal’ means very small, accordingly MP is the output contributed by the last unit of labour. So,
MP = TPL – TPL-1
Example: One labourer works with a sewing machine to stitch two shirts. Another labourer joins and the two could stitch 6 shirts. Calculate MP?
MP = TP2 – TP2-1 = TP2 – TP1 = 6 – 2 = 4
‘L’ is the units of labour employed or the level of employment of variable factor, i.e labour. It is given numerically as 0, 1, 2, 3, 4, 5, 6, 7, 8, 9, and so on. L = 0 means there is no employment of labour. ‘L–1’ is the previous level of employment, given ‘L’. For example, if L = 3, then L–1 = 2 and so on.