Unformatted text preview: output that it produces – i.e. its Total Product, denoted by TP – is a function of two variables: capital, denoted by K , and labor, denoted by L . + , 5 . 5 . L K L , K TP ¡ So what is the Marginal Product of Labor, denoted MPL ? Marginal Product of Labor is the change in Total Product caused by an increase in Labor input. Marginal Product of Labor is the derivative of Total Product with respect to Labor. Notice that we’re looking solely at the change in Total Product that occurs when we vary the Labor input. We’re not changing the capital stock, so when we take the derivative of Total Product with respect to Labor, we’ll hold the firm’s capital stock is fixed – i.e. we’ll hold it constant . + , + , 5 . 5 . 5 . 5 . L K 5 . L d L K, TP d MPL L K L , K TP ¡ ¡ o ¡ Page 21...
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- Fall '10
- Economics, Marginal product, total product