Value of Marginal Product of labor

Calculates the amount of a firm's revenue that a unit of

productive output contributes. VMP helps to prevent labor
exploitation in industries.
Value of Marginal Product is a calculation derived by
Marginal product of labor x The price of the output
 VMPL = MPL x P
Ex: The firm added one more employee, who added 2 more products to the
output. So, how much money did the new employee generate if 1 product was
sold for $10? The answer is that the 2 more products added by the new
employee sold for $10 each imply that the new employee just made $20 for
the firm. And that is the value of their marginal product of labor.
1. Marginal Product - this refers to the change in output as a
result of additional labor or units.
2. Marginal Revenue Product (MRP) - This is an increase
in a firm's revenue resulting from adding one more resource
unit is called the marginal product.
As a result of the law of diminishing returns, marginal
product and MRP will decline once more inputs are added
This figure shows how the value of the marginal product (the
marginal product times the price of the output) depends on the
number of workers. The curve slopes downward because of
diminishing marginal product. For a competitive, profit-
maximizing firm, this value-of-marginal-product curve is also
the firm’s labor-demand curve
Value of the marginal product of labor (VMPL)
• Competitive, profit-maximizing firm
– Hires workers up to the point where
• Value of the marginal product of labor = wage
• The value-of-marginal-product curve
– Is the labor-demand curve
• For a competitive, profit-maximizing firm
• Labor-demand curve
– Reflects the value of marginal product of labor