TOTAL, AVERAGE AND MARGINAL PRODUCT OF LABOUR

When measuring a firm operating efficiency, it is easier and more practicable to use a single resource factor rather than the different combinations of resources that the firm uses for production.

For this reason, we shall be focusing on the productivity of labour. And to understand this, we will be utilizing three terms: total product, average product, and marginal product.

The total product of labour

Total product of labour is the aggregate sum of all output from all units of labour used in a given period. 

In simple words, It is the total quantity produced from the units of labour used in the production.

Total product is very relevant for measuring the entire productivity of labour.

Total product provides simple, yet important information as to how efficient and effective a firm is producing output relative to its industry.

The average product of labour

Average product of labour is simply the per-unit product of labour. It is obtained by dividing the total product by units of labour. Mathematically, it is expressed this way

$APL=\frac{TPL}{L}$

Where TPL is total product and

             L is the number of units of labour

Example

Given a firm was able to produce 100,000 units of books after employing 1000 workers. Calculate its average product.

$APL=\frac{TPL}{L}$

$APL=\frac{100,000}{1000}$

$APL=100$

Hence, the average productivity was 100 units per work.

Average product is very important as it helps firms to know which worker productivity is below and above the average.

The marginal product of labour

This measures the productivity of each additional unit of labour.

It is the additional output that can be obtained by using an additional unit of labour, holding all others inputs constant.

It is obtained by dividing the change in the total product by the change in units of labour.

If we were to represent this mathematically, it will be written as thus:

$MPL=\frac{∆TPL}{∆L}$

Where ∆TP is changed in total product

             ∆L changes in Labour.

Example

If a firm could produce 80 units of a good with 10 workers or produce 87 units of goods with 11 workers. Calculate the marginal product of the 11th worker.

$MPL=\frac{∆TPL}{∆L}$

$MPL=\frac{87-80}{11-10}$

$MPL=7$

Thus, the marginal product of the 11th worker is just 7 units.

Perhaps the best way to explain total, average, and marginal product is to use a table

labourTotal product average product Marginal product
00 ______ ______
1200200200
2420 210 230
3600 200180
4720 180 120
5800 16080
6840 140 40
7700100-140

As can be seen, the total product increases until the 7th worker, where the total product decreases by 140. 

At the 7th worker, the firm experience what economists called diminishing marginal returns or a negative marginal product.

No firm will want to employ a worker that will bring about negative productivity.

Hence, the possible number of workers that will be considered for employment is 6.

At the employment level of 2 workers, we see that the average productivity is 210, which is lesser than the productivity of the second worker( which is 230)

We can deduce that the second worker is performing better than the average worker.

At the employment level of 5 workers, we observed that the average productivity is 160 which is twice the productivity of the 5th worker, which is 80.

Hence, we see that the 5th worker will be performing below the average product.

Relationship between marginal product and average product

The relationship between marginal product and the average product is such that:

1. When marginal product is below average product, the average product willl fall.

2. When marginal product is above average produce, the average product will rise.

3. When marginal product is equal to average product, then, the average product is at its maximum.

Relationship between marginal product and average product

The relationship between marginal product and the total product is such that:

1. Total product increases when marginal product is positive

2. Total product decreases when marginal product is negative.

3. Total product is at its maximum when marginal product is zero.

Conclusion

Productivity is a key element in determining cost and, ultimately, profits.

For example, it has been established that there is an inverse relationship between marginal product and the marginal cost of resources.

That is marginal product increases when marginal cost decreases and decreases when marginal cost increases.

Hence, every firm utilizing labour must consider the productivity of labour, otherwise, it would run bankrupt.

Before you go, I recommend you try this single quiz question.

The average product of labor is maximized when marginal product of labor:


Equals zero
Equals the average product of the labor
Is maximized
None of the above

see solution

If The Average Productivity Of Labor Equals The Marginal Productivity Of Labor, Then the average productivity of labor is at maximum.

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