Economics, 3rd Edition

P

l ’ P d

ti

F

FIGURE 6.1

diminishing marginal product

 the property whereby the marginal product of an input declines as the quantity of the 

input increases

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138  PART 2  SUPPLY AND DEMAND: HOW MARKETS WORK

other’s way and efficiency would be significantly impaired. Hence, as more and more workers are hired, 

each additional worker contributes less to the production of pizzas.

Diminishing marginal product is also apparent in panel (a) of Figure 6.1. The production function’s slope 

(‘rise over run’) tells us the change in Paolo’s output of pizzas (‘rise’) for each additional input of labour (‘run’). 

That is, the slope of the production function measures the marginal product of a worker. As the number 

of workers increases, the marginal product declines, and the production function becomes flatter. In this 

example the production function is curvilinear and as a result the use of calculus to find marginal product 

would give a more accurate answer than would simply finding the average of the slope between two points.

For example, suppose that the production function for Paolo’s factory looked like this:

Q = 20K

0.5

L

0.5

If K = 16 and L = 25, then the marginal product of labour would be:

MP

L

=

𝜕

 

Q

𝜕

 

L

  

𝜕

 

Q

𝜕

 

L

= 10K

  

0.5

L

−0.5

=

10"K

"

L

=

40

5

= 8