## What is Marginal Product?

**Marginal Product in economics refers to the additional output or product that is generated by adding one more unit of input or factor of production while holding all other inputs constant.**

In other words, it is the change in total output that results from a small change in the amount of a particular input used in the production process.

The concept of the marginal product helps businesses determine the optimal level of inputs to use in order to maximize their profits.* At the point where the marginal product of an input is equal to its marginal cost, a firm will achieve its maximum level of output and profits.*

The marginal product can also be used to determine the value of a particular input or factor of production. For example, if the marginal product of labor is high, it indicates that each additional worker is generating a significant amount of output and is therefore more valuable to the production process.

## How does the Marginal Product Work?

For example, a company is producing tables using two inputs, labor and wood. The company has 10 workers and is using 100 units of wood to produce 50 tables per day.

The company wants to determine how much additional output it can generate by adding one more worker to the production process, while keeping the amount of wood constant at 100 units.

**When the company adds one more worker and the total output increases to 52 tables per day, the marginal product of labor can be calculated as:**

Marginal Product of Labor = Change in Total Output / Change in Labor Input

Marginal Product of Labor = (52 tables – 50 tables) / (11 workers – 10 workers) = 2 tables/day

This means that by adding one more worker, the company is able to produce an additional 2 tables per day.

**If the marginal cost of hiring another worker is less than the additional revenue generated from producing those 2 tables, then it would make sense for the company to hire the additional worker.**

However, if the marginal cost is greater than the additional revenue, then it would not be economically efficient to hire the additional worker.