How to Calculate the Marginal Revenue Product
Marginal revenue product shows how much a company's revenue will change, usually for an individual project, given the change in some sort of variable. Variables include items such as increasing employees, increasing employee hours worked or increasing inventory on hand. Marginal revenue product is important because it helps companies decide at what output revenue is maximized. Marginal revenue product looks at the demand curve where the y-axis is the revenue change, and the x-axis is the output change.
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Instructions
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Find the change in revenue at the given output if a variable changes on the demand curve. For example, a company wants to see marginal revenue product if they increase employee hours. By increasing employee hours worked each week, output increases to 100 units from 90 units, and revenue increases from $300 to $320. Here, the change in revenue is $20.
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Determine the change in output due to the change of the variable. In our example, 100 units minus 90 units equals a change in output of 10 units.
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Divide the change in revenue by the change in the output to determine marginal revenue product. In our example, $20 divided by 10 units equals a marginal revenue product of $2.
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References
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Comments
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I don't get it. Ok, my question is as follows: If one worker can pick R30's worth of grapes and two workers together can pick R50's worth of grapes, what is the marginal revenue product for the first worker, the second worker and for each worker?
