Assignment Help - homework help

  Marginal Productivity Theory of Distribution

Marginal Productivity Theory of Distribution:

The marginal productivity hypothesis of distribution is the common theory of distribution. The theory elucidates how prices of different factors of production are determined under situation of perfect competition. This emphasizes that any variable factor should acquire a reward equivalent to its marginal product.

There is no basic difference between the mechanisms of determination of prices of commodities and that of factor prices. The factor prices are determined in markets beneath the forces of supply and demand. However there is one difference. As the demand for commodities is direct demand, the demand for factors of production is derived demand. For illustration, there will be demand for workers busy in construction industry (example, masons) only whenever there is demand for housing.

According to the marginal productivity hypothesis of distribution, in a perfectly competitive market (i.e., for products and inputs), each and every factor will be paid a price equivalent to the value of its physical product. However the theory is applicable to each factors of production, we might illustrate it with reference to labor.

A firm will go on using more and more units of a factor until the price of that factor is equivalent to the value of the marginal product. In another words, all factor will be rewarded according to its marginal productivity. The marginal productivity is equivalent to the value of the additional product that an employer acquires whenever he employs an additional unit of that factor. We suppose that the supply of all other factors stay constant.

We shall provide a simple example of the marginal productivity theory of distribution by making utilization of labor.

The main aim of a firm is maximization of gain. It will hire a factor as long as it adds more to net revenue than to total cost. Therefore a firm will hire a factor up to the point at which the marginal unit contributes as much to net cost as to total revenue since total profit can’t be further raised.

Latest technology based Economics Online Tutoring Assistance

Tutors, at the www.tutorsglobe.com, take pledge to provide full satisfaction and assurance in Marginal Productivity help via online tutoring. Students are getting 100% satisfaction by online tutors across the globe. Here you can get homework help for Marginal Productivity, project ideas and tutorials. We provide email based Marginal Productivity help. You can join us to ask queries 24x7 with live, experienced and qualified online tutors specialized in Marginal Productivity. Through Online Tutoring, you would be able to complete your homework or assignments at your home. Tutors at the TutorsGlobe are committed to provide the best quality online tutoring assistance for Economics Homework help and assignment help services. They use their experience, as they have solved thousands of Economics assignments, which may help you to solve your complex issues of Marginal Productivity. TutorsGlobe assure for the best quality compliance to your homework. Compromise with quality is not in our dictionary. If we feel that we are not able to provide the homework help as per the deadline or given instruction by the student, we refund the money of the student without any delay.
Home | Company Overview | Services | Discover Q&A | Sitemap | Contact Us | T & C | Refund Policy | Copyright Policy | Blog | Q&A | Directory

©TutorsGlobe All rights reserved 2022-2023.