Explain the law of variable proportions with the help of total, average and marginal product.

1. Introduction to the Law of Variable Proportions:

The Law of Variable Proportions, also known as the Law of Diminishing Returns, is a fundamental concept in economics that explains the relationship between inputs and outputs in the production process. According to this law, as one input is increased while keeping other inputs constant, the marginal product of that input will eventually decrease, indicating diminishing returns.

2. Total Product (TP), Average Product (AP), and Marginal Product (MP):

• Total Product (TP): Total Product refers to the total output produced by a given quantity of inputs (e.g., labor, capital) in the production process.
• Average Product (AP): Average Product is the output produced per unit of input. It is calculated by dividing total product by the quantity of input used.
• Marginal Product (MP): Marginal Product is the additional output produced by using one more unit of input, while keeping other inputs constant.

3. Illustration of the Law of Variable Proportions:

Let's consider a hypothetical scenario of a farm with fixed land and capital, where the only variable input is labor.

4. Explanation of the Law of Variable Proportions:

• Initially, as more labor is employed (from 0 to 1 unit), total product increases rapidly, and both average and marginal product are high.
• However, as more labor is added (from 1 to 2 units), total product still increases, but at a decreasing rate. Average product starts to decline, indicating diminishing returns to labor.
• Eventually, as more labor is added (from 3 to 4 units), total product increases by a smaller amount, and marginal product becomes negative, indicating that adding more labor reduces total output.

5. Conclusion:

The Law of Variable Proportions illustrates the diminishing returns to an input when other inputs are held constant. It highlights the importance of efficient allocation of resources in production to maximize output. Understanding this law helps producers optimize their production processes and make informed decisions regarding input usage.