Average Product

Average Product

Average product is a measure of productivity that tells us, on average, how much output each unit of a variable input produces. In the context of a production function where labour is the variable input and capital is fixed, we focus on the average product of labour.

Definition

The average product of labour ($AP_L$) is defined as the output per unit of labour employed. It answers the question: "For a given amount of capital, what is the typical contribution of each worker to total output?"

Formula

The formula for calculating the average product of labour is straightforward:

Where:

• $AP_L$ = Average product of labour
• $TP$ = Total product (total output)
• $L$ = Number of units of labour (the variable input)

This is equation (3.2) in the textbook.

Numerical Example

The textbook provides a numerical illustration using the production function from Table 3.1, with capital fixed at 4 units. The values for average product of labour are shown in the last column of Table 3.2.

To obtain these values, you simply divide the total product (column 2 of the table) by the corresponding number of labour units (column 1). For instance, if 1 unit of labour produces a total product of, say, 10 units, then the average product of labour is $10/1 = 10$. If 2 units of labour produce a total product of 24 units, then the average product is $24/2 = 12$.

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