Giving reasons explain the Law of Variable Proportions

1.	Giving reasons explain the Law of Variable Proportions
Answer» Solution :The law of DIMINISHING returns to a FACTOR states that Marginal PRODUCT of a factor initially rises with its employment level, but after a certain level of employment it starts falling and ultimately becomes negative. Reasons behind Phase-1 (i) Better utilisation of FIXED factor. (ii) Effecient utilisation of variable factor. (iii) Better co-ordination between factors. Reasons behind Phase-2 (i) Over-utilisation of the fixed factor. (ii) Imperfect Substitution of factors. (iii) Poor Coordination. Reasons behind Phase-3 (i) Fixity of fixed factor. (ii) Overcrowding of fixed factor. (iii) Defective factor ratio.

Discussion