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Law of Variable Proportion - Production Analysis, Business Economics & Finance Video Lecture | Business Economics & Finance - B Com
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FAQs on Law of Variable Proportion - Production Analysis, Business Economics & Finance Video Lecture - Business Economics & Finance - B Com
| 1. What is the law of variable proportion in production analysis? |  |
Ans. The law of variable proportion, also known as the law of diminishing returns, is an economic principle that states that as one input is increased while keeping other inputs constant, the marginal product of the variable input will eventually decrease. This means that at some point, adding more of the variable input will result in smaller increases in output.
| 2. How does the law of variable proportion affect production? | |
Ans. The law of variable proportion affects production by highlighting the point at which the addition of more variable inputs leads to diminishing returns. Initially, increasing the quantity of the variable input allows for greater output, but as the law suggests, there reaches a point where the marginal product starts to decrease. This indicates that the resources being added are no longer as productive, leading to inefficiencies in the production process.
| 3. Can you provide an example to illustrate the law of variable proportion? | |
Ans. Certainly! Let's consider a bakery that produces cakes. Initially, the bakery has one baker and one oven, and they can produce 10 cakes per day. By adding another baker, the production increases to 20 cakes per day. However, if a third baker is hired, the production may only increase to 25 cakes per day. In this example, the law of variable proportion is observed as the addition of each baker leads to a smaller increase in output.
| 4. What factors contribute to the law of variable proportion? | |
Ans. Several factors contribute to the law of variable proportion. Firstly, the law assumes that there are fixed inputs, such as machinery or facilities, which remain constant during the production process. Secondly, the law considers the efficiency of the variable input, as it may decrease as more units are added. Lastly, the law acknowledges the concept of diminishing marginal returns, which suggests that the productivity of additional units of the variable input will eventually decline.
| 5. How does the law of variable proportion impact decision-making in business? | |
Ans. The law of variable proportion provides valuable insights into decision-making in business. It helps businesses determine the optimal level of inputs to use in the production process to maximize output. By understanding the point of diminishing returns, businesses can avoid overinvestment in certain resources and allocate their resources more efficiently. This knowledge also assists in cost analysis and pricing decisions, as it allows businesses to estimate the impact of changing input levels on production costs and overall profitability.
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Nov 16, 2024 Last updated |
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