The Law of Variable Proportion states that as the quantity of a factor is increased while keeping other factors constant, the Total Product (TP) first rises at an incremental rate, then at a decremental rate and lastly the total production begins to fall.

What are the 3 stages of returns?

Under the law of diminishing marginal returns, removing inputs to a point can result in cost savings without diminishing production. There are three types of returns to scale: constant returns to scale (CRS), increasing returns to scale (IRS), and decreasing returns to scale (DRS).

What are the 3 stages of law of production?

There is no difference between fixed and variable factors of production. There are 3 stages namely, increased returns, constant returns, and decreasing returns, and no stage is considered best for the long run. Q2. State the Law of Variable Proportion with its Assumptions.

Which is the best stage of production?

Stage one is the period of most growth in a company’s production. In this period, each additional variable input will produce more products. This signifies an increasing marginal return; the investment on the variable input outweighs the cost of producing an additional product at an increasing rate.

When does the law of variable proportion apply?

Returns to a factor refers to the resultant increase in the total product (return) when only one factor is increased, keeping all other factors fixed. In the short run, when one input is variable and all other inputs are fixed, the firm’s production function exhibits the law of variable proportions.

What does Samuelson mean by the law of variable proportion?

Samuelson “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.” Leftwitch

How does the law of variable proportion affect marginal productivity?

“in a given state of technology, when the units of variable factor of production (L) are increased within the units of other fixed factors, the marginal productivity increases at increasing rate up to a point, after this point. it will become less and less” The assumptions of the law of variable proportion are given as below:

When does the proportion of a variable factor increase?

When the quantity of one factor is varied, keeping the quantity of other factors con­stant, the proportion between the variable factor and the fixed factor is altered; the ratio of employ­ment of the variable factor to that of the fixed factor goes on increasing as the quantity of the variable factor is increased.