What is law of variable proportions? what is the authentic statement of this Law??
What are the assumptions of Law of variable proportion, and what is the complete material to write Law of variable proportion?
Law of variable returns refers to the fact that in a production situation the marginal product output per extra unit of a factor of production varies as the total quantity of that factor used for production varies, keeping quantity of all other factors of production constant. In a typical production function the marginal product of a factor tends to be increase as the total quantity of the factor is low. With increasing increasing total factor quantity the marginal product tends to reach a peak and remain stable there up to certain increase in total factor quantity. After this point the marginal product begins to fall with the total factor quantity till it become zero.
This law of variable returns is applicable only in the short term when the following assumptions apply.
- It is not possible to change the quantities of other factors of production.
- Technology of production employed remains unchanged.
- It is possible to change the factor of production. For example it is possible to increase factor of production like labour, but it may not be possible to install additional capital equipment.