N materials include steel, plastics, electricity, water, and any other goods that the firm buys and transforms into final products. N when capital is fixed but labour is variable, the only way the firm can produce more output is by increasing its labour input. N average product output per unit of a particular input (apl); calculated by dividing the total output q by total input of labour l. N average product of labour measures productivity of workforce in terms of how much output each worker produces on average. N marginal product additional output produced as an input is increased by one unit (mpl); can be written as q/l in other. N when the marginal product is greater than the average product, the average product is increasing. N when the marginal product is less than the average product, the average product is decreasing.