Concept Of Total, Average And Marginal Productivity
This involves how output varies with the quantity of the variables factor used.
1. Total Productivity
This refers to the total amount of goods produced over a period of time, by all the factors of production used in production within that period. In production venture, output can increase with increase in the quantity of factors of production used in the production especially if the fixed factor is not yet fully utilized.
Example: Let use only two factors of production labour (capital) were used in production. Let labour be the variable factor while capital is the fixed factor. Here is a hypothetical output figures obtained with the given varying unit of labour.
Variation is output using one variable factor (Labour) and one fixed factor (capital).
2. Average Productivity
This can be defined as the total product per-unit of the variable factor. It is formed by dividing the total output by the unit of the variable factor used it’s production.
Variation in output using one variable factor (labour and one fixed capital). While preparing the table, the first column will show the varying unit of labour employed, the second column will show the varying total product which the third column will contain the varying average productivity.
Average productivity figures are usually used in the determination of the level of efficiently in the use of factors of production of goods and services.
3. Marginal Productivity
It is the change in total output which result from the use of one unit more of the variable factor or it measures the rate at which total product changes as the variable factor is increased by one unit expressed in a mathematical form.
MP = DTP_DL where:
MP stands for Marginal Productivity.
DTP stands for Change in Total Product While
DL stands for change in the variable factor (labour).
To expand the table of Average Productivity to reflect Marginal Product. Thus:
Variation in output using one variable factor (labour) and one fixed (capital).