Concept of Total Product, Average Product and Marginal Product – SS1 Economics Lesson Note (Second Term)

Total product (TP) is the total quantity of goods produced using all the factors of production. Average product (AP) is the output per unit of the variable factor employed. Marginal product (MP) is the extra output from adding one more unit of the variable factor while other factors stay fixed.

Behavioural objectives

By the end of the lesson, students should be able to:

• define total product, average product and marginal product;
• write the formula for each of the three measures;
• describe the relationship between total product and marginal product.

What are total product, average product and marginal product?

What is total product (TP)?

Total product refers to the total quantity of goods produced at a particular time as a result of the use of all the factors of production. It is written symbolically as TP = AP × Q, where Q is the quantity of the variable factor employed.

What is average product (AP)?

Average product is the output per unit of the variable factor (labour or capital) employed. It is obtained by dividing the total output by the number of labour or capital units employed.

AP = TP/Q

What is marginal product (MP)?

Marginal product is the additional product produced as a result of the application of an additional unit of a variable factor when all other factors are fixed.

It is written symbolically as MP = change in TP/change in variable factor = (TP1 – TP0)/(Q1 – Q0).

How are total product, average product and marginal product related?

The relationship between total product, average product and marginal product can be shown on a graph. Both TP and MP initially rise. TP is at its maximum point when MP is zero. After MP = 0, MP takes negative values and TP declines.

Evaluation

1. Define total product.
2. Write the formula for average product.
3. What is marginal product? Write its formula.
4. What happens to total product when marginal product is zero?

Assignment

1. Explain the difference between average product and marginal product.
2. State what happens to total product when marginal product becomes negative.