Marginal Product Formula | Calculator (Examples with Excel Template)

Marginal Product Formula
Marginal Product Formula (Table of Contents)

What is the Marginal Product Formula?

In economics, the condition “ marginal product ” refers to the addition in product output due to an increase in the variable input by a unit. In early words, the fringy product measures the productiveness of the extra unit of the variable input. The examples of variable input signal can be british labour party, capital, etc. The recipe for a marginal intersection can be derived by dividing the addition in production end product ( ΔY ) by the increase in variable star stimulation ( ΔI ). mathematically, it is represented as,

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Marginal Product = Increase in Production Output (ΔY) / Change in Variable Input (ΔI)
far, the formula for a borderline intersection can be elaborated into
Marginal Product = (Y1 – Y0) / (I1 – I0)
where ,

  • Y0= Initial Production Output
  • Y1 = Final Production Output,
  • I0 = Initial Variable Input
  • I1 = Final Variable Input

Examples of Marginal Product Formula (With Excel Template)

Let ’ s take an model to understand the calculation of Marginal Product in a better manner .
You can download this Marginal Product Formula Excel Template here – Marginal Product Formula Excel Template

Marginal Product Formula – Example #1

Let us take the example of a company ERT Ltd. which is an automotive parts manufacturing company. The senior management of the company wants to study the impact of the increase in man hours on the overall production output. During a recent experiment, the daily man hours was increased from 7,200 to 8,000 resulting in an increase in daily production output from 15,000 pieces to 17,000 pieces. Calculator the marginal product of one man hour based on the given information.
Marginal Product Formula-1.1
Solution:
fringy Product is calculated using the convention given below
Marginal Product = (Y1 – Y0) / (I1 – I0)
Calculation of Man Hours

  • Marginal Product = (17,000 – 15,000) / (8,000 – 7,200)
  • Marginal Product = 2.5 pieces per man hour

therefore, ERT Ltd. ’ s fringy intersection is 2.5 pieces per serviceman hour which means the addition of each unit of man hour will increase the daily product output by 2.5 pieces .

Marginal Product Formula – Example #2

Let us take the example of a company which is planning to hire new staff to increase its vehicle cleaning capacity. However, the management has decided to track how each recruit adds to the daily washes performed in the company. The following shows the change in the total number of washes in a day vis-à-vis the number of employees,
Marginal Product Formula-2.1
Solution:
Calculation of Staff Member
For 5th Staff Member

  • Marginal Product 5th = (48 – 40) / (5 – 4)
  • Marginal Product 5th = 8 daily washes

For 6th Staff Member

  • Marginal Product 6th = (56 – 48) / (6 – 5)
  • Marginal Product 6th = 8 daily washes

For 7th Staff Member

  • Marginal Product 7th = (63 – 56) / (7 – 6)
  • Marginal Product 7th = 7 daily washes

For 8th staff Member

  • Marginal Product 8th = (69 – 63) / (8 – 7)
  • Marginal Product 8th = 6 daily washes

For 9th Staff Member

  • Marginal Product 9th = (74 – 69) / (9 – 8)
  • Marginal Product 9th = 5 daily washes

For 10th Staff Member

  • Marginal Product 10th = (78 – 74) / (10 – 9)
  • Marginal Product 10th = 4 daily washes

Explanation

The formula for a marginal intersection can be computed by using the follow steps :
Step 1: first, determine the production end product and the variable input at the beginning of the time period and they are denoted by Y0 and I0 respectively .
Step 2: Next, determine the production output and the variable input at the end of the period and they are denoted by Y1 and I1 respectively .
Step 3: Next, compute the increase in production output which is the final production output ( step 2 ) subtraction initial production output ( step 1 ) .
Increase in Production Output, ΔY = Y1 – Y0
Step 4: Next, compute the increase in variable remark which is final variable stimulation ( step 2 ) minus initial variable star input signal ( step 1 ) .
Increase in Variable Input, ΔI = I1 – I0
Step 5: ultimately, the recipe for a bare product can be derived by dividing the increase in production output signal ( step 3 ) by the increase in variable input ( step 4 ) as shown below .
Marginal Product = Increase in Production Output (ΔY) / Change in Variable Input (ΔI)
Marginal Product = (Y1 – Y0) / (I1 – I0)

Relevance and Use of Marginal Product Formula

It is significant to understand the concept of fringy product because it is used as one of the drive factors of the level of production. The underlying theory of borderline product is the law of diminishing fringy returns which states that the marginal productivity will finally decrease beyond a certain charge owing to several functional limitations. In fact, there are cases where marginal productiveness can become damaging enough to reduce the overall production flush with the accession of a newfangled variable whole. In such cases, it is advisable to stop increasing that variable input .

Marginal Product Formula Calculator

You can use the follow Marginal Product Formula Calculator

Y1
Y0
I1
I0
Marginal Product
 

Marginal Product =
Y1 − Y0
=
I1 – I0
0− 0
= 0
0- 0

Recommended Articles

This is a guide to the Marginal Product Formula. here we discuss how to calculate Marginal Product along with virtual examples. We besides provide a borderline Product calculator with a downloadable excel template. You may besides look at the following articles to learn more –

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