Total Production, Marginal Production, Average Production

Differentiate an input and keep all the other inputs unchanged, then for different degrees of that input we get different degrees of output. This association between the variable input and output, keeping all the other inputs unchanged is often referred to as total product (TP) of the variable input. This is also sometimes termed as the total return or total physical product of the variable input. It will be helpful to elucidate the concepts of average product (AP) and marginal product (MP). They are useful in order to explain the contribution of the variable inputs to the production procedure.

The function that explains the relationship between physical inputs and physical output (final output) is called the production function. We normally denote the production function in the form:

Q = f(X1, X2)

Where,

Q Represents the final output.

X1 and X2 are inputs or factors of production.

Total Production

Total Product as the total volume or amount of final output produced by a firm using given inputs in a given period of time.

Total product of a factor is the amount of total output produced by a given amount of the factor, other factors held constant. As the amount of a factor increases, the total output increases.

Marginal Production

The additional output produced as a result of employing an additional unit of the variable factor input is called the Marginal Product. Thus, we can say that marginal product is the addition to Total Product when an extra factor input is used.

Marginal Product = Change in Output/ Change in Input

Average Production

It is defined as the output per unit of factor inputs or the average of the total product per unit of input and can be calculated by dividing the Total Product by the inputs (variable factors).

Average Product = Total Product/ Units of Variable Factor Input

Relationship between Average Product and Marginal Product

There exists an interesting relationship between Average Product and Marginal Product. We can summarize it as under:

• When Average Product is declining, Marginal Product lies below Average Product.
• When Average Product is rising, Marginal Product lies above Average Product.
• At the maximum of Average Product, Marginal and Average Product equal each other.

Relationship between Marginal Product and Total Product

The law of variable proportions is used to explain the relationship between Total Product and Marginal Product. It states that when only one variable factor input is allowed to increase and all other inputs are kept constant, the following can be observed:

• When the MP declines but remains positive, the Total Product is increasing but at a decreasing rate. This give ends the Total product curve a concave shape after the point of inflexion. This continues until the Total product curve reaches its maximum.
• When the Marginal Product (MP) increases, the Total Product is also increasing at an increasing rate. This gives the Total product curve a convex shape in the beginning as variable factor inputs increase. This continues to the point where the MP curve reaches its maximum.
• When the MP becomes zero, Total Product reaches its maximum.
• When the MP is declining and negative, the Total Product declines.