We revisit our example from the Diminishing Returns section, this time focusing on marginal product and diminishing marginal product.
Marginal Product (MP) is the added output (Q) of a variable input. In this case, suppose workers are the variable input and machinery is a fixed input.
Average Product (AP) is output divided by the variable input, labor here (Q ÷ L).
As the number of workers
increase, output rises, but in the short run it increases at
a decreasing rate after the first few workers. As we can see,
diminishing marginal product sets in after the 3rd worker.