LAW OF VARIABLE PROPORTIONS

In short-period when the output of a production is sought to be increased by way of

additional application of the variable factor to a given quantity of fixed factors, law of
variable proportions comes into operation. The law of variable proportions is that law
which predicts the consequences of varying the proportions in which the fixed and
variable factors of production are used. When the number of one factor is increased while
all other factors remain constant, then the proportion between the fixed and variable
factors is altered. Supposing there are two factors of production i.e. land and labour. Land
is fixed factor and labour is a variable factor. Suppose you have a land measuring 2
hectares. You grow tomatoes on it with the help of a labourer. Accordingly the proportion
between labour and land will be 1:2. If the number of labourers is increased to 2 then the
new proportion between labour and land will be 2:2, in other words, if there were 2
hectares of land per labourer previously, now there will be 1 hactare of land per laborer.
On account of change in the proportion of factors there will also be a change in total
output at different rates. In Economics, this tendency is called Law of Variable
Proportions. The law of variable proportions stats that as the proportion of factors is
changed, the total production at first increases more than proportionately, then equal-
proportionately and finally less than proportionately. The classical economists called it
the Law of Diminishing Returns. They derived it by applying more and more labour to a
fixed acreage of land, and thought of it as associated particularly with agriculture. But it
is a general principle that can be applied to any production operation. It is now usually
called the Law of Variable Proportions. It can also be called the Law of Diminishing
Marginal product or Diminishing Marginal Returns or simply as Diminishing Returns.