The total amount of goods and services produced in a given period with the given set of inputs is known as total product. Total product is the starting point for the analysis of short-run production. It indicates how much output a firm can produce according to the law of diminishing marginal returns.
Initially, total product increases at an increasing rate upto a certain limit. After that, it increases at a decreasing rate, becomes maximum, and begins to decline.
Total Product Curve
Total product curve starts origin, initially increases at an increasing rate, then increases at a decreasing rate, reaches maximum point, and finally begins to decline. Thus, as more variable factors are employed, it will not always increase the total product. It can be explained by the help of a total product schedule and total product curve given below:
|Units Of Labor||Total Product ( In units)|
In the above table initially , total product increases at and increasing rate up to the employment of the 3rd unit of labour. When the 5th unit of labour is employed, TP becomes maximum at 90 units and at the 6th units of labour, it is stable. With the employment of the 7th unit of labour, it begins to decline. It is also shown in the figure below.
In the above figure, units of labour are shown on the X-axis and total product on the Y-axis. As units of labour increase, TP curve increases at an increasing rate upto the pint A. Then TP curve increases at decreasing rate upto the point B. TP is maximum at the point C and then falls after the point C.