Law of variables
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.
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| 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
2nd 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
3rd 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.
