How to Calculate MRP in Economics

vm/E+/GettyImages

Marginal revenue product (MRP) is an economics term used to describe the change in total revenue that results from a unit change of some type of variable input. There are many types of variable inputs that you can change, such as the addition of an employee or the addition of a new machine. However, the MRP will only measure the change of one variable at a time. You can calculate the MRP by completing a mathematical equation.

Determine the change in variable input. For example, assume that a business added five new employees.

Determine the change in total revenue. For example, assume that total revenue increased by $100,000 after hiring the additional employees.

 

Divide the change in total revenue from Step 2 by the change in variable input from Step 1. Continuing the same example, $100,000 / 5 = $20,000. This figure represents the marginal revenue product, or MRP.

 

References

About the Author

Since 1992 Matt McGew has provided content for on and offline businesses and publications. Previous work has appeared in the "Los Angeles Times," Travelocity and "GQ Magazine." McGew specializes in search engine optimization and has a Master of Arts in journalism from New York University.