Final answer:
The theory of marginal productivity is focused on the distribution of the income among the factors of production, emphasizing how changes in labor and other inputs affect the output in both short and long terms within an economic system.
Step-by-step explanation:
The theory of marginal productivity is an attempt to explain how income is shared among the factors of production.
Explanation: The theory of marginal productivity examines how the factors of production—land, labor, capital, and entrepreneurship—affect the production of goods and services. It is a core concept that correlates with the distribution of income among these factors. In the short run, the theory allows for changes in the amount of labor, which is considered a variable input. In the long run, it looks at the adjustments in various inputs to determine the optimal mix for production efficiency.
The broader concept here relates to an economic system where the theory of production is pertinent. In capitalism, for instance, private ownership and investment lead to production, and the prices and wages are determined by the forces of supply and demand. The theory of marginal productivity specifically helps explain how adding units of a single variable input, like labor, will vary the output produced. This theory is aligned with neoclassical economics, which emphasizes the idea that supply can determine the size of the economy, a viewpoint originally presented by classical economists such as Jean-Baptiste Say and Adam Smith.