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What is the relationship between average and marginal productivity?
"Where marginal product exceeds average productivity, average productivity rises.
And where marginal productivity is less than average productivity, average productivity declines when the variable input increases.
By law of diminishing marginal product, MP is decreasing with the increase of inputs, as it goes down beyond the average productivity, it will make the average productivity goes down."
Think about the following example,
Two twins are enrolled in ECO 365. They each had a "B" average (GPA = 3.0) before taking the class.
Twin One gets a "C" in the course. What happens to her GPA? Twin Two gets an "A" in the class. What happens to her GPA?
Twin One will have a lower GPA and Twin Two a higher GPA. A "marginal" grade lower than the average will pull down the average. A "marginal" grade higher than the average will increase the average. The same is true of MP and AP.
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Relationship between marginal and average productivity
Relationship between Average and Marginal Productivity
Average productivity can be defined as the total product per unit of factors, employed in the production process. On the other side, marginal productivity or product of an input is the extra output added by one extra unit of that input, while other factors of production are held constant. Law of diminishing returns is the only law that explains the relationship between the ...
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