Importance of the law of variable proportions?

Answer 1

Sometimes referred to as variable factor proportions, law of diminishing returns states that as equal quantities of one variable factor are increased, while other factor inputs remain constant, ceteris paribus, a point is reached beyond which the addition of one more unit of the variable factor will result in a diminishing rate of return and the marginal physical product will fall.

Answer 2

The Law of Variable Proportions Is also called the Law of Decreasing marginal returns.It states that " An increase in some inputs relative to other fixed inputs will, in a given state of technology , cause the output to increase, however after a certain point extra output resulting from the same additions of extra inputs will become less and less ".

Answer 3

The law of variable proportion is defined as, if one variable in production is increased in number, the output will at first increase before it deteriorates over time. Assumptions of the law of variable proportion include that labor is a single variable factor and that some inputs have to be kept constant.

Answer 4

The Law of Variable Proportion has universal applicability in any branch of production. It forms the basis of a number of doctrines in economics. The Malthusian theory of population stems from the fact that food supply does not increase faster than the growth in population because of the operation of the law of diminishing returns in agriculture.

Ricardo also based his theory of rent on this principle. According to him rent arises because the operation of the law of diminishing return forces the application of additional doses of labour and capital on a piece of land. Similarly the law of diminishing marginal utility and that of diminishing marginal physical productivity in the theory of distribution are also based on this theory.

The law is of fundamental importance for understanding the problems of underdeveloped countries. In such agricultural economies the pressure of population on land increases with the increase in population. This leads to declining or even zero or negative marginal productivity of workers. This explains the operation of the law of diminishing returns in LDCs in its intensive form. Ragnar Nurkse have suggested ways to make use of these disguisedly unemployed labour by withdrawing them and putting them in those occupations where the marginal productivity is positive.

Answer 5

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