Average and Marginal Productivity
The average productivity is the output per worker. Productivity is “an economic measure of output per unit of input” (Investopedia, (2014). Input is labor or capital and output is revenue. A productivity will decrease if it is more than marginal productivity. But it will increase if productivity is less than marginal productivity. An increase in productivity means more goods and services that need to occur. Marginal product is “the additional output that will be forth coming from an additional worker, other inputs constant” (Colander, (2010), pp. 280). This is when input increases by one but the rate of outcome increases. The relation between average and marginal productivity is either a rise or decline. If marginal product is more than average product, then there is a rise. On the other hand, if average product is more than marginal product, a decrease exist. Technological innovations, such as computers, help average and marginal productivity. Computer help to make jobs go faster whether the task is giving multiple people a memo or giving a single person a message that is two cities away, e-mail is very useful for these tasks. Excel makes accounting duties that use to take days, even weeks to accomplish, can now be put together in matters of minutes or an hour.
Law of Diminishing Marginal Productivity
An economic principle that states that while increasing one input and keeping other inputs at the same level may initially increase output, further increases in that input will have a limited effect, and eventually no effect or a negative effect, on output. The law of diminishing marginal productivity helps explain why increasing production is not always the best way to increase profitability.
The law of diminishing marginal productivity shows us that instead of continuing to increase the same input, it might be better to stop at