![]() But what happens if you add another person? He might be able to add 20 kebabs, but not more. The additions to total output are increasing. If we add another person, who is an expert on dealing with the customers, the previous two guys will concentrate on just cooking and they might be able to start producing 50 kebabs per hour. Their total production will be 25 kebabs per hour, meaning marginal product of the second worker was 15. If we add another worker, they will divide jobs – one will be preparing the fries and veggies, the other one – meat. Imagine a kebab truck on a university campus. It is easier to understand this with an example. ![]() In simple words it means that as you add more of a variable factor of production to fixed factor of production (in an attempt to increase total output) the additions (marginal product) to total output will eventually become negative. The definition of this law: as more of a variable factor (of production) is added to a fixed factor (of production) the additional to total output will eventually begin to decline. This is a good definition to memorise for your exam. It is called the law of diminishing marginal returns. This diagram illustrates a very important concept in IB economics which you have to understand and be able to clearly explain. ![]() See the average product, marginal product and total product diagrams below: For example, a pizzeria adds one more cook and their total quantity of pizzas produced increases by 50, the marginal product of that additional worker is 50. Marginal product (MP) – the additional quantity added to total product as one more unit of a factor is added.Normally, we choose to calculate average product of labour: divide total quantity by number of workers. Average product (AP) – quantity of goods or services produced per some quantity of input.This simply means the total output being produced. Total product – total quantity of goods or services produced with given inputs.There are a few definitions that you must know and be able to explain: Long run – period of time when all factors of production are variable.Usually, capital is chosen to be fixed and number of employees (labor) – variable. Short run – period of time when at least one factor of production is fixed (by definition meaning, that one or more are variable).It is very important to distinguish between short run and long run when talking about production:
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