Law of variable proportion in a simple language. This is frequently asked in CBSE board examinations in Economics subject

1. 1
Law of variable proportions
This law is related to the short run production function in which output is increased only by
increased application of variable factor. Students and reader must note that “ labour” is
considered variable factor for this purpose.
This law states about the behaviour of output when we continuously increase variable factor.
Fixed factor remains constant in this case.
According to the law of variable proportions when we increase variable factor continuously then
following results are obtained:
# stage 1
Total product increases with increasing rate. Increasing rate means additions in total product
increases. see the table below for better understanding.
# stage 2
Total product increases with decreasing rate. See the table below.
# stage 3
Total product starts to decrease.
This behaviour of total product is based on marginal product. Let's talk about marginal product
behaviour in all three stages.
# stage 1
Marginal product increases.
# stage 2
Marginal product decreases
# Stage 3
Negative marginal product.
Table-. Law of variable proportions

2. 2
Fixed Factor Variable Factor Total Product Marginal Product
1 1 20 0
1 2 35 10
1 3 55 20
1 4 70 15
1 5 80 10
1 6 80 0
1 7 75 -5
In the above table till the variable factor 3 , producer is experiencing 1st stage. TP is increasing
at increasing rate. This stage is known as increasing returns to factor.
Till the variable factor 4 and 5 , TP is increasing at decreasing rate. This is 2nd stage and
known as decreasing returns to factor.
At the variable factor 6, TP becomes maximum. Eventually a situation comes when TP starts to
decrease. This is 3rd stage known as negative returns to factor.
Assumptions
● Law of variable proportion operates only in short run.
● Variable factors are homogeneous
● Technology is constant
If above assumptions disturb then law operates to fail. This is also called as postponement of
the law.
Important Definitions
According to F.Benham
“As the proportion of one factor in a combination of factors is increased, after a point, first the
marginal and then the average product of that factor will diminish.”
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 addition of
extra inputs will become less.” (Paul A. Samuelson)
Where will producer stop ?

3. 3
Producer will stop himself to produce when he will get constant returns to factor. This situation
will arise somewhere between stage 2 and stage 3.
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