Statement of Law of Variable Proportion
The Law of Variable Proportions states that as we increase the quantity of only one input while keeping other inputs fixed, the total product increases initially at an increasing rate, then at a decreasing rate, and finally at a negative rate.
As per the law of variable proportions, the changes in TP and MP can be categorized into three phases:
Phase 1: TP rises at an increasing rate, and MP increases.
Phase 2: TP rises at a decreasing rate, MP decreases and is positive.
Phase 3: TP falls, and MP becomes negative.
Law of Variable Proportion: Meaning, Assumptions, Phases and Reasons for Variable Proportions
The Law of Variable Proportions is a crucial concept in production theory, providing insights into how varying one input affects overall production. It underscores the importance of optimal resource utilization and helps in making informed decisions about input levels to achieve desired production outcomes.