Marginal product of labor and capital, Macroeconomics

Assignment Help:

We define marginal product of labor, MPL as the derivative of f with respect to the L - which is, as (approximately) how much Y will increase when L increases by one unit. We also describe the marginal product of capital, MPK as the derivative of f with respect to K. Note that MPL and MPK will rely on both L and K (MPL and MPK are functions, not variables). 

MPL = df/dL, MPK= df/dK

  • since f is increasing in L, MPLshould be positive for all values of L and K.
  • MPLpresumed to be decreasing in L - the more work that is used, the lower the marginal product of labor.
  • MPLpresumed to be increasing in K - the more capital, the higher the marginal product of labor.
  • Similarly MPKshould be positive for all values of L and K.
  • MPK is presumed to be decreasing in K and increasing in L.

When we view Y as a function of L holding K fix, Y will be increasing in L however at a decreasing pace (Because of the fact that MPL is positive though decreasing in L). 

1638_Marginal product of labor and capital.png

Figure:Production function

We state labour productivity as Y/L that is, as GDP per hour worked. Labour productivity tells us how much we can produce by employing one hour of labour and it relies on the amount of capital and the technology.


Related Discussions:- Marginal product of labor and capital

Opportunity Costs, Comparative if Person can make 15 wristbands and hour an...

Comparative if Person can make 15 wristbands and hour and 3 potholders. What is the comparative advantage? If same person works 20 hours a week graph the possible combinations sh

Basic concepts and terminology, when domestic currency becomes more valuabl...

when domestic currency becomes more valuable in terms of foreign currency, the domestic currency is said to have

Gross domestic product, In 1 to 2 sentences respond to the following commen...

In 1 to 2 sentences respond to the following comment. "Pollution restrictions will reduce gross domestic product and therefore hurt the economy."

Determine the output level-wholesale price, Assume an industry with one ups...

Assume an industry with one upstream and one downstream monopoly. The upstream monopoly produces Q , which is sold solely to the downstream monopoly. The downstream monopoly faces

Point consumer equilibrium, Suppose that the marginal utility of good A is ...

Suppose that the marginal utility of good A is 4 times the marginal utility of good B, but the price of good A is only 2 times the price of good B. Is this point consumer equilibri

Commercial banks: balance sheet, Commercial Banks: Balance Sheet The ac...

Commercial Banks: Balance Sheet The accompaning table gives the balance sheet of a commercial bank in a simplified format. The balance sheet contains particulars of a Bank's cu

List of major emerging-market economies, List of major emerging-market econ...

List of major emerging-market economies To determine if the UK is to benefit from growth of emerging-market economies in the future, it should start exporting goods and specif

Equilibrium in money markit, equilibrium in money market and derivation of ...

equilibrium in money market and derivation of lm curve

Market demand curve, The entire market is capture by a single firm which ca...

The entire market is capture by a single firm which can produce at a constant average and marginal cost of AC = MC = 10. The firm faces a market demand curve given by Q = 60 ? P.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd