Marginal Revenue Product (MRP)

Definition

Marginal Revenue Product (MRP) is the additional revenue generated by hiring one more unit of a factor of production, such as labor. It represents the change in total revenue resulting from employing an additional unit of input.

Related terms

Marginal Productivity Theory: The marginal productivity theory states that firms will hire workers up to the point where their marginal product equals their wage rate.

Diminishing Marginal Returns: Diminishing marginal returns occur when adding more units of a variable input leads to smaller increases in output.

Elasticity of Resource Demand: The elasticity of resource demand measures how responsive the quantity demanded of a factor of production is to changes in its price.