DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : P. Sankara Rao
Designation : Lecturer
Branch : Commercial and Computer Practice
Institute : Govt. Polytechnic, Srikakulam
Year/Semester : V Semester
Subject : Business Economics - I
Subject Code : CCP502
Topic : Laws of Production
Duration : 50 Mts
Sub Topic : Law of Variable Proportion (Contd..)
Teaching aids : PPT and Animations
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Objectives :

On completion of the period, you would be

able to:
 Understand the law of variable proportion
and its stages
 Represent the law of variable proportion
through a table
 Understand the law of variable proportion
with the help of a diagram

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Recap :

In the last class we have already learnt:

 The meaning of law of variable proportions

 Various definitions given to law of variable
proportions
 Total product, Marginal Product and average
product and their calculation

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Law of Variable Proportion :
 The law of variable proportions examines the effect
of production when one factor is kept constant and
others are increased. Thus, as the proportions of
factors are changed, we get Increasing, Constant
and Diminishing returns
 This law is therefore called Law of Variable
proportions. Increasing, Constant and Diminishing
returns are different stages of the law of variable
proportions
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Let us illustrate the law with the help of below table:

 Where on the fixed input land of 4 acres, units of

the variable factor labour are employed and the
resultant output is obtained.
 The production function is revealed in the first two
columns. The average product and marginal
product columns are derived from the total
product column.

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 The average product per worker is obtained by
dividing the column(2) by a corresponding unit in
the column(1)
 The marginal product is the addition to total
product by employing an extra worker
 For instance, 3 workers produce 36 units and 4
workers produce 48 units. Thus,
 Marginal product = 12 i.e (48-36)units

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Table 1: Output of Wheat in
Physical Units :
No. of Total Average Marginal Stage
workers product product product
(1) (2) (3) (4)
1 8 8 8
2 20 10 12 Stage I
3 36 12 16
4 48 12 12
5 55 11 7 Stage II
6 60 10 5
7 60 8.6 0
8 56 7 -4 Stage III
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Analysis of the Table :

 The total, average and marginal products

increase at first, reach a maximum and then
start declining
 The total product reaches its maximum when 7
units of labour are used and then it declines
 The average product continues to rise till 4th
unit while the marginal product reaches its
maximum at the 3rd unit of labour then they
also fall
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 It should be noted that the point of falling output is
not the same for total, average and marginal
product
 The marginal product starts declining first, the
average product following it and the total product is
the last to fall
 This observation points out that the tendency to
diminishing returns is ultimately found in three
productive concepts

CCP502.39 9
Facts relating to the above table:

 Average product rises slowly and falls slowly

 Marginal product rises rapidly and falls rapidly
 Total product increase at diminishing rate until
marginal production is zero. It reaches highest
level there

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Summary :

We have so far learnt,

 Law of Variable Proportion explained with
an illustration

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Quiz :

1. Additional product derived on employing an

additional unit of a factor is called _____
a) Total production
b) Average production
c) Marginal product
d) None of the above

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Frequently Asked Questions :

1. What do you mean Law of Variable

Proportions ?
2. How many stages are there in Law of
Variable Proportions ? What are those ?
3. Explain the different stages of law of variable
proportion.

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