marginal productivity

Marginal productivity refers to the additional output generated by adding one more unit of a particular input, like labor or capital, while keeping other inputs constant. In simpler terms, if you hire one more worker, marginal productivity measures how much extra product that worker can produce. This concept is important in economics, helping businesses understand the value of inputs and make informed decisions about hiring or investing. Essentially, it helps determine how efficiently resources are used to create goods and services, impacting wages and economic growth.