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Presented by:

Himanshu Garg
MBA (Sem-I)
Introduction
Meaning
Production Schedule
Graphical Representation
Stages of the Law
Assumptions
Postponement
Conclusion
When producing an economic product, the
supplier must decide how much of each input
to use:
– Land
– Labor
– Capital
 In particular, the supplier must examine the
relation between input and output.
 Law of Variable Proportion states that as
more and more units of the variable factor are
applied with fixed factors, in the beginning
total output increases at increasing rate.
Beyond a certain point, it rises at diminishing
rate. Finally total production starts declining
with every increase in variable input.
Units of Total Average Marginal Stages
labour product product product

0 0 0 0 Stage 1
1 4 4 4 Stage of
increasing
2 10 5 6 returns
3 18 6 8
4 24 6 6
5 28 5.6 4 Stage 2
stage of
6 28 4.6 0 diminishing
returns
7 20 2.8 -8 Stage 3
Stage of
8 16 2 -4 negative
returns
T
A

Total product in
t of TP
Po ion
x
n fle
i

M
x
s1 s2 s3

stage stage2 stage3


Marginal product and
average product

AP

s1 s2
s3
MP
Units of labour
FIRST STAGE
Total product increases at an increases rate and
later at a diminishing rate.
Average product increases and reaches its
maximum point.
Marginal product initially increases, then starts
declining, but continues to remain above the
average product.
Total Product increases at a diminishing rate.
Average Product continues to fall.
Marginal Product decreases and finally
becomes zero.
Total Product begins to fall.
Average Product continues to fall.
Marginal Product becomes negative.
One factor is variable & other factors are
fixed.
All units of variable factor are fixed
Technology is assumed to be given &
constant.
The Law applies only in the short period.
Factors of production are not perfect
substitute for each other.
The application of the law of variable
proportions can be postponed if improvement
in technology take place.
 The operation of the law may be postponed
when the factor of production are perfect
substitute of each other.
 The greatest productivity is at the end of
Stage I.
 The greatest output is at the end of Stage
II.
 Therefore, Stage II is ideal, because there
is a balance between productivity and total
output.
The Law of Variable Proportions states
that while varying only one input, output will
go through three stages:
– Increasing returns
– Diminishing returns (ideal)
– Negative returns