![]() This is known as the principle of variation. A direct implication is that as the relative prices of factors change, the proportion in which they are employed will change as well, in order to reestablish equality between marginal product and input prices. The concept of MPL has a central place in marginal productivity theory, since at the very core of this approach is the understanding that in a competitive market the remuneration of each productive factor should be equal to its marginal contribution to production. THE MARGINAL PRODUCT OF LABOR AND THE DISTRIBUTION OF INCOME ” These definitions may be easily extended to the case of joint production, that is, when a firm, for a given combination of inputs, produces more than one output (the so-called multiproduct firm). The marginal product of labor can then be rigorously expressed by the first partial derivative of f with respect to l :Īlthough the same name is generally given to the two definitions reported above -and what follows will conform to this general use -it would be more appropriate to call the former (the discrete case) the “marginal product of labor, ” while the latter (the continuous case) would be more appropriately defined as the “marginal productivity of labor. Moreover, modern neoclassical production theory assumes that labor (and the other inputs it is combined with) can be employed at a continuous level (a realistic assumption labor is measured in “labor time ”), and that the production function is continuous, with continuous first derivatives. Formally, assuming that the technology of the firm is described by the production function y = f(l, x 1, 2, …, x n ), MPL is expressed as follows:īroadly speaking, the concept of MPL describes the ratio of change in output stemming from a small, or “marginal, ” increase in the use of labor. The change in output resulting from the addition of one extra unit of labor, with the other inputs being held constant, is called the marginal, or physical, product of labor (MPL). THE LAW OF VARIABLE PROPORTIONS AND THE LAW OF DIMINISHING PRODUCTĬonsider a firm producing a homogeneous output y employing labor l and other n factors of production: x 1, x 2, …, x n.
0 Comments
Leave a Reply. |