Question

In the following table, identify the different phases of the law of variable proportions and also explain the causes.

Variable Input (Units)	$1$	$2$	$3$	$4$	$5$	$6$
Total Product (Units)	$10$	$22$	$32$	$40$	$40$	$35$

Answer 1

Variable Input (Units)	Total Product (Units)	Marginal Product (Units)	Phases
$1$	$10$	$10$	Phase - I Increasing returns to a factor
$2$	$22$	$12$
$3$	$32$	$10$	Phase - II Diminishing returns to a factor
$4$	$40$	$8$
$5$	$40$	$0$	Phase - III Negative returns to a factor
$6$	$35$	$-5$

Causes of Increasing Returns:
(i) Greater application of the variable factor facilitates better division of labour.
(ii) Greater application of the variable factor improves coordination between the factors.
(iii) Greater application of the variable factor ensures better utilisation of the fixed factor.
Causes of Diminishing Returns:
(i) Fixity of the Factors: As more and more units of a variation factor are combined with the fixed factor, the latter gets over utilised. Hence, the diminishing returns.
(ii) Factors of production are imperfect substitutes of each other.
(iii) The coordination between factors gets distorted so that marginal product of the variable factor declines.