Law of Variable Proportions: Assumptions, Explanation , Stages , Causes of Applicability and Applicability of the Law of Variable Proportions!
Law of Variable Proportions occupies an important place in economic theory. This law is also known as Law of Proportionality.
Keeping other factors fixed, the law explains the production function with one factor variable. In the short run when output of a commodity is sought to be increased, the law of variable proportions comes into operation. Therefore, when the number of one factor is increased or decreased, while other factors are constant, the proportion between the factors is altered. For instance, there are two factors of production viz., land and labour.
Land is a fixed factor whereas labour is a variable factor. Now, suppose we have a land measuring 5 hectares. We grow wheat on it with the help of variable factor i.e., labour. Accordingly, the proportion between land and labour will be 1: 5. If the number of laborers is increased to 2, the new proportion between labour and land will be 2: 5. Due to change in the proportion of factors there will also emerge a change in total output at different rates. This tendency in the theory of production called the Law of Variable Proportion.
Definitions:“As the proportion of the factor in a combination of factors is increased after a point, first the marginal and then the average product of that factor will diminish.” Benham
“An increase in some inputs relative to other fixed inputs will in a given state of technology cause output to increase, but after a point the extra output resulting from the same additions of extra inputs will become less and less.” Samuelson “The law of variable proportion states that if the inputs of one resource is increased by equal increment per unit of time while the inputs of other resources are held constant, total output will increase, but beyond some point the resulting output increases will become smaller and smaller.” Leftwitch
Assumptions:Law of variable proportions is based on following assumptions:
(i) Constant Technology:The state of technology is assumed to be given and constant. If there is an improvement in technology the production function will move upward.
(ii) Factor Proportions are Variable:The law assumes that factor proportions are variable. If factors of production are to be combined in a fixed proportion, the law has no validity.
(iii) Homogeneous Factor Units:The units of variable factor are homogeneous. Each unit is identical in quality and amount with every other unit.
(iv) Short-Run:The law operates in the short-run when it is not possible to vary all factor inputs.
Explanation of the Law:In order to understand the law of variable proportions we take the example of agriculture. Suppose land and labour are the only two factors of production.