Explain the Three Stages of the Law of Variable Proportions.
Answers
Explanation:
Law of Variable Proportions – in terms of TPP
Therefore, it has three clear stages: I – TPP increasing at an increasing rate. II – TPP increasing at a diminishing rate. III – TPP declining.
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Answer:
Three Stages of the Law
The law has three stages as explained below:
Explanation:
Stage I – The TPP increases at an increasing rate and the MPP increases too. The MPP increases with an increase in the units of the variable factor. Therefore, it is also called the stage of increasing returns. In this example, the Stage I of the law runs up to three units of labour (between the points O and L).
Stage II – The TPP continues to increase but at a diminishing rate. However, the increase is positive. Further, the MPP decreases with an increase in the number of units of the variable factor. Hence, it is called the stage of diminishing returns. In this example, Stage II runs between four to six units of labour (between the points L and M). This stage reaches a point where TPP is maximum (18 in the above example) and MPP becomes zero (point R).
Stage III – Now, the TPP starts declining, MPP decreases and becomes negative. Therefore, it is called the stage of negative returns. In this example, Stage III runs between seven to eight units of labour (from the point M onwards).
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