Question

What are the different phases in the Law of Variable Proportions in terms of marginal product? Give reason behind each phase. Use diagram.

Answer 1

Law of variable proportion:

Law of variable proportion states that as more of the variable factor input is combined with the fixed factor input, a point will eventually be reached where the marginal product of the variable factor input starts declining.

explanation:

Stage I: As more units of factor input are used, the total product increases at an increasing rate which is called increasing return to the factor input.

Stage II: However, when the 4th unit of factor input is used, the diminishing returns sets in, where TP increases at a decreasing rate.

Stage III: TP starts declining from 34 to 10 when the 9th unit is employed