Page 171 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Microeconomic Theory

Notes
Fig. 8.5

Y D E

Total product (TP) Inflexion B H C F TP

Point of

A G
O X

Y

G' H' C'
AP , MP A' B' D' E' F' AP

O X
Units of the Variable Factor MP

Relation Between Total Production and Marginal Production

(1) When marginal production increases then total production increases in increasing rate.
(2) When marginal production is constant then total production constantly produce goods.
(3) When marginal production decreases then total production decreases in decreasing rate.
(4) When marginal production gets negative then total production decreases.

Relation Between Average Product and Marginal Product

(1) When marginal production is more than average production then average production increases.
(2) When marginal production and average production are equal, the average production is maximum.
(3) When marginal production is less than average production then average production decreases.
(4) The marginal production can be zero, positive or negative but average production is always positive.
(5) According to figure, MP curve is always in the left side of AP curve.
Point of Inflexion

This is the point where the slope of TP changes. In Fig. 5, this point is G in TP curve. TP is increasing
upto this point. After this point, TP is increased but in decreasing rate.
This is the point which comes at the coincide of first stage (because in this point, MP is stable) or this is
the point which indicates the beginning of second stage (because in this point, MP decreases).

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