How does MP affect AP in econ?

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2026-04-10 17:35

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In economics, Marginal Product (MP) refers to the additional output generated by adding one more unit of a factor of production, while Average Product (AP) is the total output divided by the number of units of the factor employed. When MP is greater than AP, it indicates that the addition of more inputs is increasing overall productivity, thus raising the AP. Conversely, when MP falls below AP, it pulls the average down, as each additional unit contributes less to overall output. This relationship highlights the importance of efficiency in production and informs decisions on resource allocation.

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