The difference between marginal, average and total returns
Total returns measure all output a firm produces. Average returns measure output per worker. Marginal returns measure the extra output one additional worker adds.
Formula
AR = TR ÷ L | MR = ΔTR ÷ ΔL
Real World
Amazon's fulfilment centres track output per picker (average returns) and the contribution of each newly hired worker (marginal returns) to decide optimal staffing levels during peak seasons like Black Friday.
Exam Focus
Always distinguish which return measure a question asks for — confusing marginal with average costs the most marks.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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