Learn all about average product in just a few minutes! Professor Jadrian Wooten of Penn State University explains average product and how to calculate it.
Average product is the average output per input, often reflecting the amount of product that can be made by a single worker.
Average product is output per unit of total input of a specific factor of production. It is the result of dividing the total output by the total input. For example, the average product of labor in a firm is the overall output divided by the total number of workers. This measure is analogous; for example, to the labor productivity in an economy (i.e., the overall number of goods and services produced per person, which is an indicator of living standards in a country). To calculate the average product, other inputs have to be held constant. The average product curve for a typical good is shaped like an inverted U (hump-shaped). For example, the average product curve will rise sharply if the labor force increases from one worker to two because the extra worker allows for a division of labor that enables specialization to occur. The slope of the curve will be positive as long as this process continues. At some point, there will be less scope for specialization, and adding extra workers will produce a smaller increase in output. Eventually, the difficulty of managing large groups of people will lead to a situation where additional workers will reduce average output (even faster than the total output is reduced, because the average output is divided by a larger number of workers); when this happens, the curve will slope downward. The average product curve will not reach zero, because the work is still being done and total output remains positive.