Thursday, August 19, 2010

Law of variable proportions

Law of variable proportions
The law of variable proportions is one of the important laws of economics.It is new name for the law of diminishing returns.The economists like Marshall,Benham,Samuelson,Mrs.Joan Robinson have contributed to the development of this law.This law shows the short run input relation.The gist of this law is that if the quantity of factors is increased keeping constant the quantity of other factors,eventually the marginal and average product decline.
According to C.E. Ferguson -"As the amount of variable input is increase,the amount of other inputs held constant,a point is reached beyond which marginal product declines."
Likewise,in the worlds of W.J. Baumol -"As more and more of some input is employed,all other input quantities being held constant,eventually a point will be reached where additional quantities of input will yield diminishing marginal contribution to total product."
The clear example of this law can be found in agriculture production.In agriculture,if we keep the quantity of land fixed and go on increasing the quantity of labour,eventually the marginal product decline.

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