How to Calculate Marginal Product
Marginal product equals the change in total output divided by the change in the variable input: MP = ΔTP ÷ ΔL.
The Marginal Product formula
Calculator
Enter total product at two input levels to get marginal product and see where diminishing returns start.
Units of the variable input at the starting point.
All the output produced with that many workers.
Units of the input once the extra hire is made.
Output at the higher input level.
One more step along, so the calculator can compare two marginal products.
Output at that third input level.
Each extra worker over this step adds 15 units of output.
- Marginal product of the next step
- 10
- Average product after the hire
- 21
- Returns to the variable input
- Diminishing marginal returns
The following step adds 10 units per worker, which is what you compare against the step before.
Output per worker at the higher input level is 21 units.
Marginal product moves from 15 to 10 units, so this is where the shape of the MP curve is set.
How to calculate Marginal Product, step by step
- 1Read total product at both input levels. Total product is all the output the firm makes with that number of workers or units of input.
- 2Take the change in output. ΔTP is output at the higher input level minus output at the lower one.
- 3Divide by the change in input. MP = ΔTP ÷ ΔL. For one-worker steps the answer is simply the extra output that worker added.
- 4Find the turning point. Diminishing marginal returns begin at the first worker whose marginal product is smaller than the previous worker's.
Worked example: Marginal Product
Four workers produce 90 units and five produce 105, so the fifth worker's MP = (105 − 90) ÷ (5 − 4) = 15 units. A sixth worker lifts output to 115, so MP = 115 − 105 = 10 units, and diminishing marginal returns have set in.
Marginal Product questions
What is the law of diminishing marginal returns?
Adding more of a variable input to a fixed input eventually raises output by smaller and smaller amounts, so marginal product falls past some point.
What does a negative marginal product mean?
Total output is falling, so the extra worker gets in the way of the others. No firm hires in that range.
How does marginal product connect to marginal cost?
MC = wage ÷ MP, so a falling marginal product raises the cost of one more unit of output, which is why the MC curve slopes upward.
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