What are the different phases in the law of variable proportions in terms of total product? Give reasons behind each phase. Use diagram.
What are the different phases in the law of variable proportions in terms of total product? Give reasons behind each phase. Use diagram.
Different phases in the law of variable proportions (in terms of total product) are shown with the help of the figure.
(i) Phase I: It lies between O and K on the TP curve. In this stage, MP tends to rise till OL units of labour are used with the constant application of land. When MP is rising, TP tends to rise at an increasing rate. This occurs till point K on the TP curve and point E on the MP curve. This is a situation of increasing returns to a factor. It occurs owing to: (a) fuller utilisation of the fixed factor, and (b) better coordination among the factors of production.
(ii) Phase II: It lies between K and T on the TP curve. Beyond OL units of labour, MP tends to decline and TP increases only at a diminishing rate. This occurs between E and S on MP curve and between K and T on TP curve. This corresponds to a situation of diminishing returns to a factor. It occurs owing to: (a) excessive utilisation of the fixed factor and lower availability of the fixed factor (capital) per unit of the variable factor (labour), and (b) poor coordination among factors of production, owing to excessive employment of the variable factor.
(iii) Phase III: Beyond OS units of the variable factor, MP becomes negative. This is when TP starts declining. This phase corresponds to negative returns to a factor. The reason for negative MP is primarily the excess quantity of the variable factor that is employed, relative to the fixed factor, which becomes an obstruction to the production process.
Different phases in the law of variable proportions (in terms of total product) are shown with the help of the figure.
(i) Phase I: It lies between O and K on the TP curve. In this stage, MP tends to rise till OL units of labour are used with the constant application of land. When MP is rising, TP tends to rise at an increasing rate. This occurs till point K on the TP curve and point E on the MP curve. This is a situation of increasing returns to a factor. It occurs owing to: (a) fuller utilisation of the fixed factor, and (b) better coordination among the factors of production.
(ii) Phase II: It lies between K and T on the TP curve. Beyond OL units of labour, MP tends to decline and TP increases only at a diminishing rate. This occurs between E and S on MP curve and between K and T on TP curve. This corresponds to a situation of diminishing returns to a factor. It occurs owing to: (a) excessive utilisation of the fixed factor and lower availability of the fixed factor (capital) per unit of the variable factor (labour), and (b) poor coordination among factors of production, owing to excessive employment of the variable factor.
(iii) Phase III: Beyond OS units of the variable factor, MP becomes negative. This is when TP starts declining. This phase corresponds to negative returns to a factor. The reason for negative MP is primarily the excess quantity of the variable factor that is employed, relative to the fixed factor, which becomes an obstruction to the production process.
