Question

Explain the reasons behind the law of variable proportions.

What are the reasons for the three phases of law of variable proportions.

Explain two causes each of increasing returns, diminishing returns and negative returns to a variable factor. 

Answer 1

The law of variable proportions includes three stages increasing, diminishing, and negative returns and each happens for specific reasons.

1. Causes of Increasing Returns: Here are some of the reasons why results are going up in stage I:  
   
   1. Fuller Utilisation of Fixed Factors: Machines and other fixed sources cannot be split up. At first, they aren't being used enough because there aren't enough people. Machines are used better and more work gets done faster as more people are hired.
   2. Increase in Efficiency: With more workers, tasks can be split up and people can specialize. Each person can do the job they're best at. This helps them work faster and better.
2. Causes of Diminishing Returns: In Stage II, the following reasons lead to diminishing returns: 
   1. Disturbing the Optimum Proportion: The number of workers to machines is just right (for e.g., 5 workers for 5 machines). Adding more people after this point throws the balance off. It's full of machines, and extra people don't add much.
   2. Imperfect Substitutability of Factors of Production: Labour cannot fully take the place of machines. After a certain point, adding more workers is not going to help unless more tools are also added.
3. Causes of Negative Returns: The reasons that follow can be used to explain the stage III phenomenon of negative returns: 
   
   1. Overcrowding: It's crowded because there are not enough machines and too many people. When workers get in each other's way, it causes chaos and delays.
   2. Management Problem: It gets harder to run a business when there are more employees. It's not clear who is responsible, so people may not show up for work. This makes things less productive overall.