Total, Marginal & Average Product - Production Analysis, Business Economics & Finance Video Lecture | Business Economics & Finance - B Com

in this tutorial I'm gonna discuss
production theory with some numbers
while each of these tutorials are
independent this is the second tutorial
in a three-part series and this tutorial
I'll discuss production theory and I
will use some numbers the total product
curve and the marginal product and
average product curves look like this
and in this tutorial I'm going to take
these numbers and I'm going to plot them
and calculate them as well and show you
how it's done and I'll try to go slow
the amount of capital in my example is
fixed to two and I'll bury the Labour
and I also know the total product this
is a given now I fit plot labor along
the x axis and quantity along the y axis
I can draw in the total product curve
for example if my amount of labor is six
my total product or my quantity produced
will be 300 so the brown line is the
total product curve and the brown
numbers represent the curve again my
amount of capital is fixed at two now if
I want to calculate average product of
labor the way I do that for example I
take one labor unit and that equates to
fifty-seven quantity of 57 our total
product of 57 then I take now I take 57
divided by 1 and this is equal to 57
which is the average product of labor
let me do another example imagine I have
two labor units and my quantity or my
total product will be 118 I divide that
by 2 and my average
product of labor is 59 it turns out 177
divided by 3 is 59 as well
228 divided by 4 is 57 and let me just
fill in the rest of these numbers for
you hope you get the hang of it and 340
divided by 10 is 34 total product
divided by labor is equal to average
product of labor and now I'm going to
calculate marginal product of labor it's
a little bit different than average
product of labor actually it is
different let me start with one labor
unit I think the end like that and that
equates to a total product to quantity
of 57 now if I move to two labor units
that equates to total product or
quantity of 118 so I added one labor
unit and the question is how much
quantity did I increase how much was
quantity increased so I take 118 minus
57 divided by 2 minus 1 this is equal to
60 1 divided by 1 and this equates to 61
of course and this is my marginal
product of labor moving from 1 to 2
units of labor so I took 118 minus 57
and divided that by 2 minus 1 and that
gave me 61 let's imagine now I want to
calculate marginal product of labor at 3
labor units so take 177 minus 1 18 and
divide that by 3 minus 2
177 - 118 divided by 3 minus 2 and this
is equal to 59 divided by 1 which is
equal to 59 so the marginal product of
labor moving from 2 to 3 labor units is
59 and now I'm just going to plug and
chug the numbers into the table marginal
product of labor it's all in blue
obviously and the last value is negative
2 which is kind of interesting we'll
talk about that more in a little bit so
when I move from one labor unit to two
liberty Nets I look at the change in
labor and when I move in the upper
direction right there I look at the
change in quantity so marginal product
of labor is the change in quantity
divided by the change in labor which is
equal to marginal product of labor
so if I start out at zero and put a
little yellow dot there zero and I go
from zero to one my marginal
productivity of labour marginal product
of labor is 57 if I go from 1 to 2 it
becomes 61 if I move from 2 to 3 it goes
down and it is 59 and I'll discuss why
it goes down in a moment
from 3 to 4 it decreases again and it
goes down to 51 notice how the curve the
brown curve kind of bends down that's
what's causing that to bend down the
decreasing marginal product of labor and
if I go from 5 to 6 it's down to 30 and
so on and so forth if I continued on
this refers to diminishing marginal
returns so if I add any more than 2
labor units what I get from that
additional labor becomes less and less
so I have one labor unit it produces 57
the second one produces 61 those two
added together is my total product of
118 if I add 59 that means my total
product increases to 177 so this allows
me to calculate total product this way
as well so what you see is I can
actually add my marginal product of
labor to derive total product if I need
to 57 plus 61 is 118 plus 59 is 177 and
so on and so forth I would go but I'm
going to take the labor access and I'm
going to push that down let me slide
that down a little bit labor it is
there on the y-axis of the vertical axis
I have quantity per laborer and I can
plot my average product of labor on this
graph right there its average product of
labor at 10 labor units my average
product of labor is 34 if I continue on
up my total quantity produced at that
level is 340 so on the table I have 10
labor units total products 340 average
product of labor is 34 I'll graph
marginal product of labor is blue notice
that these two graphs intersect at 3 3
labor units average product of labor and
marginal product of labor is 59 now if I
draw on up I see the total output at
that level is 177 so I end up with 3
labor units total product at 177 average
product and marginal product of labor
are both 59 and that does it for this
tutorial on production theory with some
numbers up next I have a tutorial on the
relationship of marginal product an
average product and I'll do a little
calculus and even if you don't know
calculus I'd still encourage you to
watch the video