Let us now expand on the idea of marginalism by applying it to productivity. Virtually every act of production will require at least one land factor, although in rare cases a capital good may substitute for the land factor (

). In addition, production by definition (see Glossary) always requires a labor factor. Consequently, an act or stage of production always requires at least two scarce factors. The expression "scarce factors," of course, is technically redundant, since all goods must be scarce.

Assume that units of a consumer good C are produced by a single stage of production from factors F, G, and H. The last unit in the available stock of F is the marginal unit of F. Suppose that the stock were reduced by that marginal unit. Such a reduction would decrease the number of units of C produced by a certain quantity, known as the marginal product of F. In other words, the marginal product is the number of units of output that can be attributed to the last unit of factor F.
The subjective value of the marginal product to the producer is called the marginal productivity of F.

^Previous