Explain the law of variable proportions in term of
the total product and marginal product with
the help of diagram
Answers
Answer:
Law of variable proportion refers to when more and more variable factor gets combined with the fixed factor, the marginal product initially increases, reaches maximum then declines and ultimately becomes zero and even negative.
Explanation:
For example: there are only 2 factor of production - land and labour where land is a fixed factor and labour is a variable factor.
Land labour TP MP
1. 1 1 2 2
2. 1 2 5 3
3. 1 3 9 4
4. 1 4 12 3
5. 1 5 14 2
6. 1 6 15 1
7. 1 7 15 0
8. 1 8 14 - 1
In the following schedule, as more and more variable factor i.e. Labour combines with fixed factor i.e. Land, MP initially increases, then declines, becomes zero and then negative.
Increasing Return - from 1. To 3. i.e. When MP reaches 4 is know as increasing.
Decreasing return - from point 4. to 6. i.e. When MP starts declining from 4 to 1 is known as decreasing return.
Negative Return - point 8. i.e. When MP becomes negative is known as negative return.
This schedule can be easily understood with the help of the graph attached
Relationship between TP and MP
1. When the TP increases at an increasing rate which is upto point of inflexion, MP increases.
2. When TP increases at a diminishing rate, MP starts declining.
3. when TP reaches maximum, MP is at zero.
4. When TP starts declining, MP becomes negative.
