Economics Stack Exchange Archive

What is the difference between MVPL and MRPL?

• posted by: yuval on 2012-04-24
• tagged: microeconomics
• score: 3

I understand MVPL is marginal variable product of labor, and MRPL is marginal revenue product of labor. What is the difference between the two? Thanks!

Answer 1304

• posted by: Mikael Gislen on 2012-04-24
• score: 1

Definitions

• MP_L = The change in output (Product) from hiring one more unit of labour
• MR = Marginal Revenue (The change in revenue from hiring one more unit of labour)
• P = Price
• W = Wage

Now assuming that there are no other additional costs (such as investments)

In any market a company will hire labour as long as the Marginal Revenue (MR) > W and the benefit is MRP_L = MP_L x MR

But in a perfect competition, MR = P, and therefore MRP_L = P x MP_L, which is called Marginal Value Product MVP_L but in a monopolistic situation MR ≠ Market Price, fact it is less than the market price and the demand is only MRP_L

So Marginal Value Product per unit of labour (MVP_L) is the Marginal Revenue Product per unit of labour (MRP_L) under perfect competition.

Answer 1308

• posted by: Tom Au on 2012-04-26
• score: 1

Marginal Variable product (of labor, or anything else), refers to volume, or quantity of the marginal product produced by the last unit of labor.

Marginal REVENUE product refers to the MONEY value of the marginal product. It would be the MVPL times the monetary amount per unit.

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