Question 6 of 31intermediate💡 UnderstandLong Answer5 marks

Explain the relationship between the marginal products and the total product of an input.

Correct Answer

The relationship between Marginal Product (MP) and Total Product (TP) is fundamental to understanding production. Marginal Product is defined as the change in output per unit of change in the input, calculated as the change in TP divided by the change in labour (MPL=ΔTPLΔLMP_L = \frac{\Delta TP_L}{\Delta L}). It essentially shows the rate at which Total Product increases.

A key relationship is that Total Product is the sum of all Marginal Products up to that level of employment. For any level of an input, the sum of marginal products of every preceding unit gives the total product at that employment level. For example, if the MP of the first unit is 10 and the second is 14, the TP for 2 units becomes 24. The shape of the Marginal Product curve influences the Total Product curve. The MP curve is inverse 'U'-shaped. Initially, as labour increases, MP rises, causing Total Product to increase at an increasing rate.

However, due to the Law of Diminishing Marginal Product, MP eventually starts falling. When MP falls, Total Product still increases but at a decreasing rate. As long as the marginal product is positive, the total product remains a positively sloped curve.

Exercise: EXERCISES | Q: 5 | (Page 15)
For More Understanding

Explanation

The textbook context establishes the definition of Marginal Product as the change in Total Product (ΔTP/ΔL\Delta TP / \Delta L). It explicitly states that 'Total product is the sum of marginal products' and that MP indicates 'the rate at which TP increases'. The context describes the MP curve as inverse 'U'-shaped and the TP curve as positively sloped, linking the initial rise in MP to increasing TP and the subsequent fall in MP to TP increasing at a decreasing rate.

Solution Steps

  1. Step 1: Define Marginal Product as the change in Total Product per unit change in input (MPL=ΔTPL/ΔLMP_L = \Delta TP_L / \Delta L).

  2. Step 2: Establish that Total Product is the cumulative sum of Marginal Products for all units employed.

  3. Step 3: Explain that MP represents the rate of increase for TP.

  4. Step 4: Describe how the inverse 'U' shape of MP (initially rising, then falling) dictates the slope of the TP curve.

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