Marginal product of labour

By:

James Knight

James is a lead editor for Invezz, where he covers topics from across the financial world, from the stock… read more.

Updated: Aug 20, 2021

Ad disclosure

Invezz is an independent platform with the goal of helping users achieve financial freedom. In order to fund our work, we partner with advertisers who compensate us for users that Invezz refers to their services. While our reviews and assessments of each product on the site are independent and unbiased, brands may pay to appear higher up our table rankings or place ads in specific areas of the site. The order in which products and services appear on Invezz does not represent an endorsement from us, and please be aware that there may be other platforms available to you than the products and services that appear on our website. Read more about how we make money >

The increase in output resulting from increasing labour input by a small amount. (In mathematical terms, it is the partial derivative of the production function with respect to labour.) In line with the law of diminishing product, it is assumed that after some point increasing the input of labour results in smaller and smaller increases in output. The marginal product of labour underlies the theory of the demand for labour and the determination of the wage rate, since the firm is assumed to adjust the amount of labour it seeks to hire to the point where the revenue it obtains from the sale of the output of the marginal worker is just equal to the wage it has to pay him.

Reference: The Penguin Dictionary of Economics, 3rd edt.