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You are here: Home / Potpourri / Economics 101: Value Of The Marginal Product

Economics 101: Value Of The Marginal Product

Economics 101: Value Of The Marginal Product

[This is part of the series: The Complete Guide To Economics 101.]

What is the value of the marginal product?

Simple.

Value Of The Marginal Product is the marginal product multiplied by the price of the output you are producing.

Take the marginal product of labor as an example.

If a factory produces 50 cars per day with 10 employees, how many cars per day can the factory produce with 11 employees?

Say the answer is 56.

This means the marginal product is 6.

Adding one unit of labor increased output by 6 cars.

And say the price of a car is $50,000.

$50,000 * 6 = $300,000

Value of the marginal product = $300,000

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Filed Under: PotpourriTagged With: #Economics101

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