Inputs and Outputs of Production

Vocabulary

average product

output per unit of total input of a specific factor of production

division of labor

assignment of different parts of a manufacturing process or task to different people in order to improve efficiency that leads to specialization

factor of production

input used during the making of goods and services; e.g., capital, entrepreneurship, land, and labor

law of diminishing marginal returns

the observation in the short run that each additional unit of a production input, holding all other inputs fixed, will yield progressively smaller increases in output

long run

the period in which all productive inputs are variable

marginal product (MP)

the extra output generated by adding one more unit of input

short run

the period during which at least one input to production input is fixed and cannot be changed

specialization of labor

concentrating on a single task to develop particular skills relevant to that task

total product

the overall quantity of output created by a firm for a given combinations of inputs