How to find a limit product

How to find a limit product

Limit product – the microeconomic term which means increase in production volume of the enterprise due to use of additional unit of one of production factors at the invariance of the others.


1. In strict accordance with the economic theory the concept of a limit product is defined by two other concepts: the physical volume of a limit product which is quantity characteristic, and income from a limit product, expressed in monetary units. Limit in economic understanding "additional" means.

2. The physical volume of a limit product is quantity of the additional commodity units falling on the sum of additional costs of their production. In other words, this additional products which release could be made as a result of addition of unit of labor, a production factor.

3. Carry any resource spent for release of goods, for example, a human factor (set of intellectual and physical these workers), the capital, the earth and other natural factors, information technologies, the equipment, etc. to units of labor.

4. To find a limit product, to be exact, its physical volume, it is necessary to calculate a ratio of size of gain of products to the sum of additional costs of increase in any factor of production: Software = ∆Q / ∆ L.

5. Limit income, i.e. proceeds from sales of a limit product, represents profit on sale of an additional consignment after a covering of variable costs for its production. More widespread name of this economic concept – marginal income, an element of the operational analysis, which purpose – forecasting and planning of effective production activity at the enterprise.

6. Limit income is a variable component of profit, an indicator of its change depending on time and change of factors of production. Therefore change of profit can be presented in the form of mathematical function. In this case limit income is calculated as derivative of this function.

7. In general the concept of derivative function of the economic theory is connected with determination of extreme sizes. This mathematical term economists call "marginalism".

Author: «MirrorInfo» Dream Team