Relationship between MP & AP

1. SUBMITTED BY:
AHANA PAL
SEMESTER-1ST, BATCH 2017-19
RELATIONSHIP BETWEEN
MARGINAL PRODUCT
AND
AVERAGE PRODUCT

2. PRODUCTION PROCESS: COMBINING INPUTS OR FACTORS OF PRODUCTION TO
ACHIEVE AN OUTPUT.
FACTORS OF PRODUCTION:
• LABOR
• CAPITAL
• TECHNOLOGY (remaining unchanged for the period of analysis)
PRODUCTION
PRODUCTION FUNCTION FOR TWO INPUTS:
Q=f(K,L); where, Q = Output,
K = Capital
& L = Labor for a given technology
The production function describes the relationship between inputs (i.e. Factors of production)
such as capital and labor and the quantity of output that a firm can produce.

3. AMOUNT OF
LABOUR (L)
AMOUNT OF
CAPITAL (K)
TOTAL OUTPUT
(Q)
AVERAGE
PRODUCT
MARGINAL
PRODUCT
0 10 0 - -
1 10 10 10 10
2 10 30 15 20
3 10 60 20 30
4 10 80 20 20
5 10 95 19 15
6 10 108 18 13
7 10 112 16 4
8 10 112 14 0
9 10 108 12 -4
10 10 100 10 -8
APPLICATION

4. RELATIONSHIP BETWEEN TP, MP & AP
A
TP
AP
MP
X
Y
Z
B
C
Units of variable
inputs per period
of time
Units of variable
inputs per period
of time
Quantity of
output per
period of time
Quantity of
output per
period of time
OBSERVATIONS
• LEFT OF Y, MP>AP & AP IS
INCREASING
• RIGHT OF Y, MP<AP & AP IS
DECREASING
• AT Y, MP = AP & AP IS AT ITS
MAXIMUM

5. 3 STAGE MODEL
Average
Product
Marginal
Product
STAGE I STAGE II STAGE III

6. THANK YOU