DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : P. Sankara Rao
Designation : Lecturer
Branch : Commercial and Computer Practice
Institute : Govt. Polytechnic, Srikakulam
Year/Semester : V Semester
Subject : Business Economics - I
Subject Code : CCP502
Topic : Laws of Production
Duration : 50 Mts
Sub Topic : Law of Variable Proportion
Teaching aids : PPT and Animations
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Objective :

On completion of the period, you would be

able to:
 Define the law of variable proportion
 List definitions of various economists
 Define the Total, Average & Marginal
product
 Calculate the average product & marginal
product

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Recap :

In the earlier class we learnt:

 The equation of production function

 Various possibilities to increase the production
 Meaning of law of variable proportions
 Different stages in the law of variable
proportions

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 After consolidating the three phases of
production i.e., increasing returns, constant
returns & diminishing returns, why it is called “
Law of Variable Proportions”, Let us know:

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 When we increase one or two factors, keeping
others fixed, we are changing the proportion
between factors. We then study the relationship
between variable factor and output (returns). We
therefore call this law as “Law of variable
proportions”.

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Definitions :

The law of Variable Proportions has been

defined by various economists as follows:

“As the proportion of one factor in a combination of

factors is increased after a point first the marginal
and then the average product of the factor will
diminish”
-F. BENHAM
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 “If equal increments of one input are added, the
inputs of other productive services being held
constant, beyond a certain point the resulting
increments of product will decrease i.e. the
marginal product will diminish”.
-G. STIGLER

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To understand more clearly about this theorem,
one has to know the following concepts:

 Total Product
 Average Product
 Marginal Product

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Total Product :

 Total product refers to the total amount of output

obtained by employing the labourers on a plot of
land

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Average Product :

 Average product refers to the product of each

labourer. If we divide the total product by the
number of labourers we get average product

Average Product = Total Product

Number of Labourers

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For instance, the average product for factor input
‘a’ is

APa = Q
a
Where
Q stands for the total output

a stands for the number of factor units

employed

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Marginal Product :

 Marginal product refers to the additional

product obtained from the use of additional
labour

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Marginal product may be written as:

MPa =ΔQ
Δa
Where
ΔQ = change in output

Δa = change in factor unit

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Summary :

 Law of variable proportion

 Total product
 Average product
 Marginal product

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Frequently Asked Questions :

1. What are the important stages of Law of

Variable proportions ?
2. Define Marginal Product. Explain with
example.

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