marginal product

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The extra output that results from a small increase in an input. Formally, it is the partial derivative of the production function with respect to the quantity of an input. Hence, for a production function f(K, L), where K is capital and L is labour, the marginal product of capital is ∂f(K, L)/∂K and that of labour is ∂f(K, L)/∂L. Marginal product is measured in physical terms, disregarding any effects of the change in output on the price at which it can be sold and so is sometimes known as marginal physical product. Marginal revenue product equals marginal physical product multiplied by marginal revenue per unit of additional output sold. See also diminishing marginal product.

Subjects: Economics.

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