When producing an economic product, the supplier must decide
how much of each input to use:
In particular, the supplier must examine the relation between input
4. The Law of VariableProportion
This law place a vital role in economic theory.
It examines the production function with one factor variable,
keeping the quantities of other factors fixed.
In other words, it refers to the input-output relation when output is
increased by varying the quantity of one input.
By Benham –
“As the proportion of the factor in a combination of factors is
increased after a point, first the marginal and then the average product of
that factor will diminish.”
By Samuelson –
“An increase in some inputs relative to other fixed inputs will in a
given state of technology cause output to increase, but after a point the extra
output resulting from the same additions of extra inputs will become less and
6. By Leftwitch –
“The law of variable proportion states that if the inputs of one
resource is increased by equal increment per unit of time while the
inputs of other resources are held constant, total output will increase,
but beyond some point the resulting output increases will become
smaller and smaller.”
(i) Constant Technology:
The state of technology is assumed to be given and constant. If there
is an improvement in technology the production function will move
(ii) Factor Proportions are Variable:
The law assumes that factor proportions are variable. If factors of
production are to be combined in a fixed proportion, the law has no
8. (iii) Homogeneous Factor Units:
The units of variable factor are homogeneous. Each unit is identical
in quality and amount with every other unit.
The law operates in the short-run where it is not possible to vary all
9. Explanation of thelaw
In order to understand the law of variable proportion, we take the
example of agriculture. Suppose land and labour are the only two
factors of production.
As we can observe from the table (next slide), the output varies with
one of the input is fixed and varying other input.
The output varies in three different stages.
11. Calculationsof TotalProduct,AverageProductand
The sum total volume of Production or total number of Units produced with the given
fixed and variable inputs.
The ratio between total product and number of units of variable factor.
AP = TP / Units of VariableFactor
The Increment in total output due to the use of an extra unit of labour.
MP = ∆TP/ ∆ L
20. Three Stages ofLaw
Stage 1 <Increasing Returns>
The output increases in an increasing rate.
Stage 2 <Diminishing Returns>
The output increases in a diminishing rate
Stage 3 <Negative Returns>
The output goes in negative value.