Question

Examine the Law of Variable Proportions with the help of a diagram.

Answer 1

According to G. Stigler, “As equal increments of one input are added, the inputs of other productive services being held constant, beyond a certain point the resulting increments of the product will decrease (ie) the marginal product will diminish”.
Assumptions:

1. Only one factor is variable.
2. All units of the variable factor are homogeneous
3. The product is measured in physical units.
4. There is no change in the state of technology and the price of the product.

Stage of production:

Units of variable factor (L1)	Total Product (TPL1)	Marginal Product (MPL1)	Average Product (APL1)	Stages
1	2	2	2	I
2	6	4	3
3	12	6	4
4	16	4	4	II
5	18	2	3.6
6	18	0	3	III
7	16	-2	2.28

Units of variable factor (labour) are employed along with other fixed factors. There are three stages of production.

• Stage I:
  a. In the first stage MP_L increases up to the third labourer and is higher than the average product.
  b. So that total product is increasing at an increasing rate.
• Stage II:
  a. MP_L decreases up to the sixth unit of labour where the MP_L curve intersects the x-axis.
  b. At the fourth unit of labour MP_L = AP_L
  c. After this, the MP_L curve is lower than the AP_L. TP_L increases at a decreasing rate.
• Stage III:
  a. The seventh unit of labour is marked by negative MP_L the AP_L continues to fall but positive.
  b. TP_L declines with the employment of more units of labour.