Explain the law of variable proportion with the help of tp and mp curves
Answers
This law states that if we go on increasing more and more of a variable input, the amount of other inputs held constant, the returns to the variable input become non-proportional
The whole production phase can be distinguished into three different production stages.
IstStage: Increasing Returns to a Factor
This stages starts from the origin point O and continues till the point of inflexion (F) on the TP curve. During this phase, TP increases at an increasing rate and is also accompanied by rising MP curve. The MP curve attains its maximum point corresponding to the point of inflexion. Throughout this stage, AP continues to rise
IIndStage: Diminishing Returns to a Factor
This stage starts from point F and continues till point H on the TP curve. During this stage, the TP increases but at a decreasing rate and attains its maximum point at H, where it remains constant. On the other hand, the MP curve continues to fall and cuts AP from its maximum point S, where MP equals AP. When TP attains its maximum point, corresponding to it, MP becomes zero. AP, in this stage initially rises, attains its maximum point at S and thereafter starts falling
IIIrdStage: Negative Returns to a Factor
This stage begins from the point H on the TP curve. Throughout this point, TP curve is falling and MP curve is negative. Simultaneously, the AP curve continues to fall and approaches the x-axis (but does not touch it).
