Average Product

Definition

The average product is a measure of productivity that represents the output per unit of input in the production process. It is calculated by dividing the total output by the quantity of the variable input used to produce that output.

5 Must Know Facts For Your Next Test

1. The average product is used to measure the productivity of a production process and is an important concept in the analysis of short-run production.
2. The average product curve typically has an initial increasing phase followed by a decreasing phase, reflecting the law of diminishing marginal returns.
3. The maximum point on the average product curve represents the point of maximum productivity, where the average product is at its highest.
4. The relationship between the average product and the marginal product is that the marginal product intersects the average product curve at the point where the average product is at its maximum.
5. The average product is a useful metric for comparing the productivity of different production processes or for evaluating the efficiency of a production process over time.

Review Questions

• Explain how the average product is calculated and its relationship to the total product.
  • The average product is calculated by dividing the total product (the total quantity of output produced) by the quantity of the variable input used to produce that output. This relationship can be expressed as: Average Product = Total Product / Quantity of Variable Input. The average product provides a measure of the productivity of the variable input, as it represents the output per unit of input. The average product is directly related to the total product, as the total product is the numerator in the calculation of the average product.
• Describe the shape of the average product curve and its relationship to the law of diminishing marginal returns.
  • The average product curve typically has an initial increasing phase followed by a decreasing phase. This shape is a result of the law of diminishing marginal returns, which states that as more of a variable input is added to a fixed input, the marginal product of the variable input will eventually decrease. The point at which the average product curve reaches its maximum represents the point of maximum productivity, where the average product is at its highest. Beyond this point, the average product curve will begin to decrease as the law of diminishing marginal returns takes effect.
• Analyze the relationship between the average product and the marginal product, and explain how this relationship can be used to understand the production process.
  • The relationship between the average product and the marginal product is that the marginal product intersects the average product curve at the point where the average product is at its maximum. This is because the marginal product represents the change in total output resulting from a one-unit increase in the variable input, and when the marginal product is equal to the average product, it indicates that the average product is at its highest. This relationship can be used to understand the production process, as it provides insights into the productivity of the variable input and the efficiency of the production process. By analyzing the average product and marginal product curves, producers can make informed decisions about the optimal level of input usage and the point at which the production process is most efficient.

Related terms

Total Product: The total product is the total quantity of output produced using a given amount of inputs.

Marginal Product: The marginal product is the change in total output resulting from a one-unit increase in the variable input, holding all other inputs constant.

Law of Diminishing Marginal Returns: The law of diminishing marginal returns states that as more of a variable input is added to a fixed input, the marginal product of the variable input will eventually decrease.