![]() We go from zero to one, we added plus 10, and you can see that there in Our diminishing returns gets even a little bit flatter. Working, we're able to produce 24, so three and 24 might be right over there. And then last but not least, when we have three people We're having diminishing marginal returns. ![]() So, it's a little bit less steep, so our marginal product of labor Line or of that curve, that tells you about the marginal product. We have a certain slope here, but it's a little less steep there. Working in our factory, we produce 18 gallons a day. And this is total product right over here. Working in the factory, we produce 10 gallons per day. Well, this first one right over here, when we have one person Which is workers per day, so one, two, and three. ![]() So, if on our horizontal axis, I have our labor units, And then in this last situation, it's going to be 24 divided by three, which is eight gallons per People working per day and we're producing 18 gallons per day, our average product as a function of labor is gonna be 18 divided by two, which is gonna be nine gallons per worker per day on average. So, our average product per worker is going to be 10 gallons. So over here, when we have one worker, our total product is 10 gallons, and we're going to divide Going to introduce you to in this video is that of average product, and this is average productĪs a function of labor. Getting smaller and smaller, so this is a diminishing marginal return. As you're adding more and more labor, your marginal return is You add four, five, six, at some point, you're not even be able to fit people into the factory, and so you're going to have what's known as aĭiminishing marginal return, and you see that right over here. Restroom or something and the third person has to go. That second person might be waiting while the first person is using the mixer and that third person is gonna be waiting while the first personĪnd the second person, maybe they're using the And you might say, why is that the case? Well, they're just not gonnaīe quite as productive. Now, there's something interesting that you're immediately seeing here, and this is actually pretty typical, is that your marginal product of labor will oftentimes go down the more and more people that you add. So, my marginal product of labor for that third worker is going to be six. Two people working there to three people working there, well, my total product goes up by six. So, that second person gets me an incrementalĮight gallons per day. One worker to two workers? Well then, I go from 10 to 18 gallons. Ice cream am I producing? So, my marginal product of labor, when I go from zero to one worker, I'm able to produce 10 more Working there per day, how many more gallons of Other thing do you get? So here, our marginal product of labor says, for each incremental unit of labor, for each incremental person Increment of one thing, how much more of the And the way to think about marginal, that's how much for every Word marginal, perhaps, in other times in your life. Now, I'm going to introduce an idea, and you've seen this Workers in our factory, let's say we can produce 24 gallons a day. If we have two workers in our factory, we're going to produce 18 gallons a day. If we have one worker at our factory, well then, we're going to be able to produce 10 gallons a day. Zero gallons of ice cream, and let's just assume that our output is in gallons, and it's gallons per day. In our ice cream factory, well then, we're going to produce And let's say that we know, if we have zero people working ![]() Would just be our output, and we'll say that's our total product as a function of labor. Workers, one worker per day, two workers per day, or How our output varies whether we have zero So, you could view thisĪs workers per day. So, in our first column, I am going to put our labor, which you could view as the input that we're going to see ![]() So, per day ice cream, ice cream production, production. Of the number of people working in the factory. Ice cream production per day varies as a function Running an ice cream factory and we care about how much our So, to give you a tangible example, let's say that we are Going be able to understand these ideas of total product, marginal product, and average product. How does our output vary as a function of one input. In this video, we're going to constrain all of the inputs but one, to really take it down to These various inputs you have, your production functionĬan give you your output. Of a production function that takes in a bunch of inputs. In previous videos, we introduced the idea ![]()
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