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State the behaviour of marginal product in the Law of Variable Proportions. Explain the causes of this behaviour. |
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Answer» Behaviour of the marginal product in the Law of Variable Proportions: Law of variable proportions states that when total output or production of a commodity is increased by adding units of a variable input, while the quantities of other inputs are held constant, then MP of the variable factor initially rises and then falls after reaching a certain level of employment of the variable factor. Causes are as follows: (i) MP rises: Because when the variable input is increased, efficient utilization of the fixed inputs takes place due to specialization. This raises efficiency of the variable input. (ii) MP faffs but is positive: Because beyond a point, increasing variable inputs Puts Pressure on fixed inputs leading to decline in efficiency. (iii) MP continues to fall and is negative: Because there are so much pressures of the variable input on the fixed inputs that total product starts declining. |
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