What does Marginal Productivity help to estimate?

Marginal productivity is an economic concept that helps estimate the additional value or output generated from a small increase in the input of a particular resource or asset. In the context of property appraisal, it is particularly useful when assessing improvements or modifications made to a property, such as the addition of a swimming pool.

Estimating the value that a swimming pool adds or detracts from a property involves understanding how much additional rental income or market value can reasonably be expected due to that enhancement. Marginal productivity takes into account not just the value added but also the costs associated with maintaining such an improvement, which can influence the overall desirability and value of the property.

This means that when appraisers use marginal productivity, they are looking to assess how much more valuable a property becomes with additions or modifications, making it a direct application in valuing the contributions of specific features to the overall value of the property.