# Marginal productivity principle of labor

The marginal productivity principle of labor is the neoclassical theory of the enterprise . It results from the solution of a company's profit maximization task. For a given production function with the usual production factors : ${\ displaystyle Y = A \ cdot F (L, K, H, N)}$

• A = technology coefficient
• L = labor (of English. Labor )
• K = capital employed
• H = human capital
• N = natural resources

To their profit maximizing, one will companies choose to work using L so that the marginal product of labor to the real wage corresponds, d. h .: . According to neoclassical economic theory , the marginal product of labor is assumed to be always positive and decreasing (see neoclassical production function ). ${\ displaystyle {\ frac {\ partial Y} {\ partial L}} = {\ frac {w} {p}}}$

Economists derive the demand from this to lower the real wage if necessary in order to achieve more work and more output, since it pays off for the company in question with a lower real wage, the labor input and thus the production up to a marginal product that is lower than the original optimum to increase the work.