1. MRP and the factors influencing it

2. Goals for today’s lesson
To recap on the factors of production covered so far.
To Define MRP
To Illustrate MRP
To outline the factor influencing MRP and MPP

3. Marginal Revenue Productivity
Marginal Revenue Productivity (MRP) is the extra revenue earned when an additional unit of a factor of production is employed
e.g. labour

4. Homework Number of Workers Total Revenue € MRP 1 120 2 180 3 280 4 350
390 6
420

5. Homework Number of Workers Total Revenue € MRP 1 120 - 2 180 60 3 280
100 4
350 70 5
390 40 6
420 30

6. Graph

7. MRP from last class Number of Workers Total Revenue € MRP 1 200 2 2803
380
100 4
430 50 5
455 25 6
470 15 7
480 10

8. Graph the Labour MRP Curve

9. Labour Hoarding
Sometimes a firm may choose to employ labour even though it is unprofitable to do so. This is called labour hoarding and occurs because:
Management feel that demand is likely to improve in future and more workers would be required
Retraining existing workers is easier than retraining new staff.

10. Factors that influence MPP
Quality / specialised nature of the factors
Training/ education provided for the factors.
Expertise of the Entrepreneur
DMR

11. Factors that influence MPP
Quality / Specialised nature of the factors:
If the quality of the factor used improves, then they become more efficient and additional output will be produced.
Shovel-mechanical digger output increases.

12. Factors that influence MPP
Training/Education provided for the factors:
If the factors are trained they become more skilled resulting in increased efficiency and more output.

13. Factors that influence MPP
Expertise of the Entrepreneur: 
If the entrepreneur is good at organising the production unit, then each factor will be more productive and work to maximum efficiency.
Disorganised business = less output

14. Factors that influence MPP

15. Factors that influence MPP
Law of DMR:
As each additional unit of a factor is used, a point will be reached where the additional output will decrease.

16. Factors that influence MRP
The productivity of the factor
The MR/Selling price of the factor
Law of demand (Elastic / Inelastic demand curve)

17. Factors that influence MRP
Productivity of the factor:
The more productive each additional factor employed is, the more MRP that factor will earn.

18. Factors that influence MRP
MR/ Selling Price of the output:
If the selling price obtained on the market is rising or constant (and not Falling) then the factors MRP will be higher.

19. Factors that influence MRP
Law of Demand:
States: In order for more to be sold, price must be reduced and hence this affects the MR obtained by the firm, If the firm faces an inelastic demand curve, then price may be readily increased with a little fall in demand.

20. MR in Perfectly Competitive markets
In perfect competition, the price for the individual firm’s output is constant.
Firm faces a horizontal (perfectly elastic) demand curve
Perfect Comp: Many sellers of an identical product. E.g. ____________
Graph:

21. Elasticity
A measure of responsiveness of quantity demanded of a good to a change in some variable e.g. price
Perfectly elastic: Any increase in the price of the a good results in its quantity falling to zero.
Perfectly inelastic: the % change in price of a good causes no change in the quantity demanded of that good e.g. _____

22. In Perfect Competition...
MPP X P = MRP in Perfect Competition

23. (Total Physical output X AR) MPP ( Δ physical output)
Competition, MRP & MPP
Number of Workers
Total Physical Output
Average Revenue (P)
Total Revenue
(Total Physical output X AR)
MPP ( Δ physical output)
MRP
(MPP X P) 1 40 5
200 2 50
250 10 3 56
280 6 30 4 59
295 15