The financial encyclopedia uses cookies to improve your user experience. Find out more here!



Marginal product


The extra output that results from a small increase in input. Formally, for a differentiable production function, it is the partial derivative of this fiinction with respect to the quantity of an input.

Marginal product is measured in physical terms, disregarding any effects of the change in output on the price at which it can be sold and so is sometimes known as marginal physical product. Marginal revenue product equals marginal physical product multiplied by marginal revenue per unit of additional output sold. See also diminishing marginal product.

Reference: Oxford Press Dictonary of Economics, 5th edt.