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.
