The Law of Variable

Proportions
&
The Law of Diminishing
Marginal Products

Objectives

To know about production function, TP AP
and MP and various stages of
production.
To understand the differences between
fixed proportion production function and
variable proportion production function.
TO develop the skill to draw diagram for
law Variable proportion.

Introduction • The Short Run & The Long Run • Total Product • Average Product • Marginal Product .

The factor which cannot be varied is called Fixed Input Other which can be varied is Variable Input Long Run Here all the input factors of production can be varied. .The Short Run & Long Run Short Run A firm cannot vary all the inputs. Therefore no fixed input.

keeping all other inputs constant. TP = Production Function q = f(x1. ¯x2) .Total Product Definition :For variable input the relationship between the variable input and output.

Average Product Definition:The output per unit of variable input. AP = TP/x1 = f (x1. ¯x2) / x1 .

the marginal product of factor 1 is : MP1 = change in output / change in input = Δq / Δx1 . When factor 2 is held constant.Marginal Product Definition:The change in output per unit of change in the input when all the other inputs are held constant.

• Assumptions of law. .Meaning of production function. • Technology remain the same. • Only one factor input varies others remain constant.Contents • Introduction: . • All the units of variable inputs are homogeneous. • Statement of law given by Benham.

Therefore know as decreasing stage. MP and AP also increase. AP and MP fall in this stage. Therefore this stage is an increasing stage. Stage III:TP. MP becomes negative and therefore this stage is known as negative stage. . Stage II: In the IInd stage TP increases at a deceasing rate. The law can be explained with the help of following table and diagram.Three stages of production Stage I: In this stage TP increase at an increasing rate. The point at which TP start to increase at decreasing rate is known as point of inflexion. MP falls but positive AP also starts to fall.

7 -2 NR .LAND LABOUR TP AP MP CONCLU SIONS 1 ACRE 0 0 0 0 1 ACRE 1 4 4 4 IR 1 ACRE 2 10 5 6 IR 1 ACRE 3 15 5 5 DR 1 ACRE 4 17 4.4 0 NR 1 ACRE 6 15 2.2 2 DR 1 ACRE 5 17 3.

.

the marginal product goes through three stages: • Stage I (Increasing returns): marginal product increases throughout. . – This is shown on the graph by an increasing slope.Conclusions • While adding units of an input (labor). – This means that every additional unit increases productivity as well as total output.

– This is shown on the graph by a decreasing positive slope.Conclusions. cont. – This means that every additional unit decreases productivity. • a waste of money and resources. though total output still increases. – This means that each additional unit actually decreases total output. • Stage III (negative returns): marginal product is negative throughout. – This is shown on the graph by a negative slope. . • Stage II (diminishing returns): marginal product decreases throughout.

• The greatest output is at the end of Stage II. .Conclusions. • Therefore. Stage II is ideal. cont. because there is a balance between productivity and total output.

Summary • 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 .

Methodology • • • • Discussion Method.x = f (L.e. E) . Introduction by asking questions and the answer production is a function of various factors of production i. Q. L. C. Diagrammatic illustration. Question answer method.

K.References • NCERT Text books.Dewett . • Microeconomics – K.

Distinguish between fixed proportion production function and variable proportion function. OR With the help of a suitable diagram explain the theory of returns to a factor. Explain Law of Variable Proportion. – Which stage of production.Assignments – – – Define Consumption functions. a reasonable producer will select? Why? .

They are able to construct a schedule and draw diagram for law of variable proportion. . variable proportion production function and law of variable proportion.Learning Outcome • Children are able to understand the concepts like production.

Value The lesson will help the children to take rationale decisions in the future regarding the stages of production. . if they become producers.

Mumbai. . Geetanjali N Nagpal PGT Economics KV Bhandup.Presented by Mrs.