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Define value of marginal productivity of labour.

Define value of marginal productivity of labour.

Solution

The value of the marginal product of labour (VMPL) is the money value of the additional output produced by employing one more unit of labour.

  1. Formula: VMPL = MPL × Price of output, where MPL (marginal productivity of labour) = ΔTP / ΔN is the extra total product from one more unit of labour.
  2. Use: it is the demand curve for labour and, under the marginal productivity theory of wage, a firm hires labour up to the point where VMPL equals the marginal cost of labour (the wage rate).

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