Marginal Product: 

Marginal product is the change in the quantity of total product resulting from a unit change in a variable input, keeping all other inputs unchanged. Marginal product is the amount of increase that takes place when some unit of input is added to the current process of manufacturing a good or service. This additional unit can involve any aspect of the process, ranging from the addition of a specific raw material to the addition of labor. Producers often look closely at the marginal product as a means of making sure the production cycle is functioning at optimum efficiency.

Because marginal product decreases as more units of a variable resource are combined with a fixed resource, returns per unit of input decrease. The property of diminishing marginal product translates to the law of diminishing marginal returns, which states that as more units of an input are used, each additional unit will increase production by a lower amount that previous units.

The theory behind the calculation of a marginal product is that there is a point at which adding additional units of some type will not result in any significant increases in output. For example, careful analysis may indicate that the addition of one additional laborer may in fact raise production levels enough to justify the extra expense. However, adding two laborers would either add nothing to the overall production rate, or possibly even cause the rate of production to decrease slightly. In this scenario, the decision would be to add one laborer only.

Marginal product is the extra output generated by an extra input. Marginal product lies at the very foundation of the analysis of short-run production, playing the critical role in the explanation of the law of supply and the upward-sloping supply curve using the law of diminishing marginal returns. Of the myriad of short-run production-related terms (including total product, average product, fixed input, variable input, short run, long run) marginal product is by far the most important.