15.5 : The Marginal Product of Labor II

The marginal product of labor, or MP_L, measures the increase in output that results from adding one more unit of labor, assuming the level of all other inputs remain constant.

Calculating the Marginal Product of Labor

The marginal product of labor is calculated as follows:

MP_L = (ΔQ/ΔL)

where,

MP_L is the marginal product of labor

ΔQ is the change in total output

ΔL is the change in labor

The marginal product of labor is subject to the law of diminishing returns. However, the falling contribution to total output when adding more workers is not due to a decline in the skills or quality of each subsequent worker hired. Rather, it is assumed for simplicity that all workers possess identical skills and productive capacity. Diminishing marginal product of labor arises because as more workers are hired, each additional worker has access to fewer fixed input resources, such as a fixed amount of capital.

Marginal Physical Product of Labor

Marginal Product of Labor is also known as the Marginal Physical Product of Labor or MPP_L. It quantifies the increase in physical units of a product manufactured due to the employment of an extra worker. The term "physical" emphasizes that it measures tangible units of output. Using "physical" distinguishes MPP_L from measures that could be influenced by prices or market values. It focuses purely on the quantity of output, providing a clear and concrete understanding of productivity. By emphasizing the physical aspect, the term MPP_L directs attention to the efficiency of the production process, rather than external economic factors. It helps in understanding how changes in labor input affect the volume of production.