Question

Study the data given below and identify the laws followed in the production of A and B depicted in the Table I and Table II. Justify your answer with a reason for each.

Table I			Table II
Machines	Labour	Output of A (units)	Machines	Labour	Output of B (units)
5	10	1000	5	10	400
5	11	1150	10	20	800
5	12	1310	15	30	1200

Answer 1

Table I depicts the Law of Variable proportions. Here, output increases due to a change in the K/L ratio, i.e., a change in labour only while the machine remains constant.

Table II depicts the law of Returns to Scale as K/L = 1/2, i.e., constant. Here, output increases due to changes in labour and machines at the same rate.