Law of variable proportion
INTRODUCTION:
The law of variable proportion describes the behavior of output as the quantity of one factor is increased keeping the quantity of other factors fixed.
FUNCTION:
A relationship between dependent and independent variables is called function.
PRODUCTION FUNCTION:
The fundamental relationship between physical inputs and physical outputs of a firm is called production function.
GENERAL PRODUCTION FUNCTION:
X =f(Lb,K,Ld,Tech)... Where; X: Output Lb: Labor K: Capital Ld: Land Tech: Technology |
DEFINITION:
The law of variable proportion can be started as,
“In a given state of technology, when the units of variable factors of production (labor) are increased with the units of other fixed factors, the marginal productivity increases at increasing rate up to a point after that point it will become less and less”.
EXPLANATION OF THE LAW:
The law of variable proportion can be explained with the help of table and graph.
SCHEDULE:
Land Labour TP AP MP Stages Relationship
10 1 10 10 10 First TP increase
10 2 30 15 20 First MP increase
10 3 60 20 30 First MP>AP
10 4 80 20 20 Second MP & AP decrease
10 5 90 18 10 Second TP increase
10 6 90 15 0 Third
10 7 80 11.5 -10 Third TP, AP & MP decrease
EXPLANATION:
In the above schedule units of variable factors (labor) are employed with the other fixed factors of production. The marginal productivity of labor goes on increase up to 3rd worker. After the 3rd worker the marginal productivity goes on falling on wards till it drops down to zero at the 6th unit of labor.
The 7th worker is responsible in making the making the marginal productivity negative. The marginal productivity (MPL) and average productivity (APL) equalize at the 4th worker then MPL falls more sharply.
Diagram:
EXPLANATION OF DIAGRAM:
We can explain diagram into three stages.
Stage 1:
This stage starts from 1st unit to 3rd unit of labor. In this stage TP, AP and MP curves are increasing.
Stage 2:
This stage starts from 4th unit to 5th unit of labor. In this stage TP curve increasing while MP
and AP curves are decreasing.
Stage 3:
This stage starts from 6th to 7th unit of labor. In this stage TP curve first reaches to its top point and then began to decrease. AP curve also decreases. MP curve first reaches to zero then becomes negative.
ASSUMPTIONS OF THE LAW:
The law holds good only under the following assumptions
The law of variable proportion can be started as,
“In a given state of technology, when the units of variable factors of production (labor) are increased with the units of other fixed factors, the marginal productivity increases at increasing rate up to a point after that point it will become less and less”.
EXPLANATION OF THE LAW:
The law of variable proportion can be explained with the help of table and graph.
SCHEDULE:
Land Labour TP AP MP Stages Relationship
10 1 10 10 10 First TP increase
10 2 30 15 20 First MP increase
10 3 60 20 30 First MP>AP
10 4 80 20 20 Second MP & AP decrease
10 5 90 18 10 Second TP increase
10 6 90 15 0 Third
10 7 80 11.5 -10 Third TP, AP & MP decrease
EXPLANATION:
In the above schedule units of variable factors (labor) are employed with the other fixed factors of production. The marginal productivity of labor goes on increase up to 3rd worker. After the 3rd worker the marginal productivity goes on falling on wards till it drops down to zero at the 6th unit of labor.
The 7th worker is responsible in making the making the marginal productivity negative. The marginal productivity (MPL) and average productivity (APL) equalize at the 4th worker then MPL falls more sharply.
Diagram:
EXPLANATION OF DIAGRAM:
We can explain diagram into three stages.
Stage 1:
This stage starts from 1st unit to 3rd unit of labor. In this stage TP, AP and MP curves are increasing.
Stage 2:
This stage starts from 4th unit to 5th unit of labor. In this stage TP curve increasing while MP
and AP curves are decreasing.
Stage 3:
This stage starts from 6th to 7th unit of labor. In this stage TP curve first reaches to its top point and then began to decrease. AP curve also decreases. MP curve first reaches to zero then becomes negative.
ASSUMPTIONS OF THE LAW:
The law holds good only under the following assumptions
® Short Run
® Technique of production ® Fix Factor ® Variable Factor ® Homogeneous ® Agricultural Commodities ® Demand, Supply, Wages & Rent Short Run: The law operates only in short run. Technique of Production: The technique of production remains unchanged. Fix Factor: Land assumes as a fix factor. Variable Factors: Labor is the variable factor. Homogeneous: All the units of labor are homogeneous. Agricultural Commodities: We are producing agricultural commodities. Demand, Supply, Wages and Rent: There is no change in demand, supply, wages and rent. LIMITATIONS OF THE LAW: Following are the limitations of the law. ® Labor ® Long Run ® Equally Efficient ® Wrong Division ® New Soil (Earth) |