Law of variables proportion

Law of variables proportion

This law related with the variable factor when we assume that rest of the factor remains stables and we bring change or increase in the variables factor then our production increase in the short run. For example – if we assume that our land, plant and equipment are stables but we increase our variables factor like man power so we are able to increase our production in short run, but after a point or a production hike our marginal production, average production & total production start decline.

Law of variables proportion

We divide all our production lines into three parts like - 

In the first stage, we increase our production at a high rate. We have lot of fix assets or factor which is not used properly so when we start using extra variables factor then we are able to use our fix factor or assets in full-swing so our production increase on high speed. In starting, we get increasing return or high return on our fix & variables factors.

In 2^nd stage, we increase our production but at a normal rate. We call this stage a law of Diminishing return or decline return on factor. In this stage, we increase our variables factor, after a stage, our average production become zero. In this point our total production on a high.

In 3^rd stage, our production start decline. We called it a negative marginal return on scale. In this stage, our total production start decline and our marginal production become negative.