Diminishing marginal productivity PDF

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Leibniz...

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DIMINISHING MARGINAL PRODUCTIVITY If the production function is

the marginal product of labour is

so the marginal product of labour diminishes as h increases if:

That is, the second derivative of the production function is negative

An example

which is positive as long as the hours of study are positive. What we want to show next is that as hours increase, this marginal product becomes smaller and smaller.

Alternatively we can show that the marginal product is decreasing by differentiating it:

This is what we wanted to show: the second derivative of the production function is negative, so the marginal product falls as h increases. In other words, the marginal product of labour is diminishing....