Relation between Total Product, Marginal Product and Average Product

The total product, or TP,  is the output produced in a specific period for each combination of labor and capital. The marginal product, or MP,  is the quotient of change in the quantity of output to change in the quantity of labor. The average product, or AP, is the quotient of the total product to the units of labor employed.

The Total Product curve rises at an increasing rate or the stage of increasing marginal returns. The Marginal Product continually rises until it peaks at the end of the stage.  The Average Product also increases, but remains below MP, in this stage.

 In the second stage, or the stage of diminishing marginal returns, the Total Product continues to increase but at a decreasing rate. In this stage, the Average Product reaches its maximum, intersects with MP, and then declines. Here, the marginal product declines and eventually reaches zero.

In the third stage or the stage of negative marginal returns, the Total Product starts declining while the Marginal Product turns negative. Here, the Average Product keeps declining further. This stage is unfavorable for producers because adding labor decreases output.