decreasing rate. This causes both the average and the marginal product
curves in part (ii) to rise at first and then decline. Where AP reaches its
maximum,.
Total, Average, and Marginal Products
Total product (TP) is the total amount that is produced during a given
period of time. For any given amount of the fixed factor, total product will
change as more or less of the variable factor is used. This variation is
shown in columns 1 and 2 of the table in Figure 7-1. Part (i) of Figure
1 plots the schedule from the table. (The shape of the curve will be
discussed shortly.)
Average product (AP) is the total product divided by the number of
units of the variable factor used to produce it. If we let the number of
units of labour be denoted by L, the average product is given by
Notice in column 3 of the table that as more labour is used, average
product first rises and then falls. The level of labour input at which
average product reaches a maximum (8 units of labour in the example) is
called the point of diminishing average productivity. Up to that point,
average product is increasing; beyond that point, average product is
decreasing.
MP=AP
AP= TLP