Marginal productivity

Marginal productivity of factors of production is the market value imputed or attributed to the use of one more, or one less, unit, i.e., the marginal unit, of labor or a material factor of production. In a free market economy, wage rates and prices paid for the material factors of production constantly tend to coincide with the productivity of the marginal unit used or employed because entrepreneurs seek to (1) expand their production whenever more units are available for less than the value their use can add to production, and (2) reduce their production whenever a marginal unit costs more than consumers are expected to pay for the value added to production by that unit.