ASSIGNMENTS SET – I

MB0026: MANAGERAL ECONOMICS

2nd Part of the Question 2–

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A hypothetical production schedule is worked out to explain he operation of the law.

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Fixed Factor = 1 Acre of land + Rs. 5000 capital. Variable factor = labor

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Units of Variable Inputs TP in AP in MP in

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(Labor) Units Units Units

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0 0 0 0
1 10 10 10 I Stage

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2 24 12 14

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3 39 13 15
4 52
tp
13 13
Ht
5 60 12 8

6 66 11 6
c.

II Stage
7 70 10 4
In

8 72 9 2
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9 72 8
0
bt

III Stage
10 70 7 -2
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Total Product or Output (TP) – It is the output derived from all factors units, both fixed
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& variable employed by the producer. It is also a sum of marginal output.

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Average Product or Output (AP) – It can be obtained by dividing total output by the
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number of variable factors employed.

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Marginal Product or Output (MP) – It is the output derived from the employment of an
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additional unit of variable factor unit

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Trends in output
From the table, one can observe the following tendencies in the TP, AP & MP
 1. Total output goes on increasing as long as MP is positive. It is the highest when
MP IS Zero and TP declines when MP becomes negative.

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2. P increases in the beginning, reaches the highest point and diminishes at the end.

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3. AP will also have the same tendencies as the MP. In the beginning MP will be

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higher than AP but at the end AP will be higher than MP.

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In the diagram below, along with OX axis, we measure the amount of variable factors

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employed and along OY – axis, we measure TP, AP & MP.

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Diagrammatic Representation

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80 tp
Ht
E
70
TP
c.

60
P
In

50
Level of Output

40 TP Series
h,

AP Series
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30 MP Series
Stage 1 Stage 2 Stage 3
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20
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10
B AP
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0
MP
1 2 3 4 5 6 7 8 9 10 11
-10
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No. of Units of va ria ble inputs

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py

…….. CONTINUED…
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