ECON 102 Lecture Notes - Lecture 14: Marginal Product, W. M. Keck Observatory, Real Wages
Document Summary
Firm"s demand for factors: we now know that our business must employ workers and rent capital in the optimizing quantities of income. But what are those quantities which optimize the profit. We first consider the quantity of labor and then the quantity of capital, to answer this question: the labor marginal product, the more workers the company hires, the greater the production it generates. The marginal product of labor (mpl) is the extra amount of output the enterprise receives from an extra unit of labour, holding the amount of capital fixed. Start making bread in a bakery once again. When a bakery hires more workers, it produces more bread. When an additional unit of workers is employed, the mpl is the amount of extra bread produced. Nevertheless, if more labor is applied to a set sum of money, the mpl rises. Less additional loaves are made, because when the kitchen is more crowded, staff are less efficient.