Variation of Output in the Short-Run Returns to a Factor

• In a factory, the output changes when you add more workers, while the number of machines stays the same.
• The change in output explains the "Returns to a Factor" rule.

A. Total Product (TP)

• TP is the total number of goods produced using a certain number of workers and fixed machines (capital).
• Example: 2 workers create 220 pens—so, TP = 220 pens.

B. Average Product (AP)

• AP is how many goods each worker makes, on average.
• Formula: \[AP=\frac{TP}{L}\]
• Example: If TP = 360 pens with 3 workers: AP = 360 ÷ 3 = 120 pens per worker.

C. Marginal Product (MP)

• MP is the extra goods made when one more worker is added.
• Formula: MP = TP_n − TP_n−1
• Example: TP with 3 workers = 360, TP with 2 = 220. So MP for 3rd worker = 360 - 220 = 140 pens.

Note: MP tells if adding workers increases or decreases output quickly.

In a sandwich shop, the first few helpers speed things up. But too many people in a small space slow down the work!

• TP increases first, gets maximum, then may fall.
• AP is average for each worker; it first rises, then falls.
• MP is the extra that comes from each new worker; it rises, then falls, and can become negative.