What happens to marginal and average productivity when techn

What happens to marginal and average productivity when technological innovation is introduced? Explain using examples.

Solution

Both marginal and average productivity increases when innovation is introduced.

Marginal productivity is the change in output from 1 unit change in input. As technology becomes more advanced, addition of each input becomes more efficient, resulting in higher output per unit of additional input.

Average productivity is total output divided by amount of input. As technology becomes more advanced, total output for a given amount of input increases, therefore average productivity increases.