1 / 14

RAMESH CHAND TAK

PREPARED BY :. RAMESH CHAND TAK. PGT : ECONOMICS. KENDRIYA VIDYALAYA (GAIL)JHABUA(M.P.). The Law o f Variable Proportion.

jenna-gamble
Download Presentation

RAMESH CHAND TAK

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. PREPARED BY : RAMESH CHAND TAK PGT : ECONOMICS KENDRIYA VIDYALAYA (GAIL)JHABUA(M.P.) R. C. TAK

  2. The Law of Variable Proportion R. C. TAK

  3. Law of variable proportion states that as more and more of the variable factor is combined with the fixed factor; a stage must ultimately come when marginal product of the variable factor starts declining. R. C. TAK

  4. Assumption 1. One Factor input is variable 2. All other factors are fixed 3. It is a short period production function4.Units of variable factor are homogeneous.5.Technique of production does not change during production. R. C. TAK

  5. I Stage of Increasing Returns ,MP↑ Diminishing MP • Negative MP R. C. TAK

  6. R. C. TAK

  7. 1stStage (Increasing returns to a factor) • TP: Increase with increasing rate • MP: Increases • AP: Increases Reasons for increasing returns to a factor • Better utilization of fixed factor • Increase in efficiency of variable factor. • Optimum combination of factors R. C. TAK

  8. 2nd Stage (Diminishing returns to a factor) • TP: Increase with decreasing rate • MP: Decreases • AP : Become constant and then decreases Reasons for diminishing returns to a factor • Indivisibility of factors. • Imperfect substitutes. R. C. TAK

  9. 3rd Stage (Negative returns to a factor) • TP :Decreases • MP : Decreases and becomes negative • AP : Decreases Reasons for negative returns to a factor • Limitation of fixed factors • Poor coordination between variable and fixed factor • Decrease in efficiency of variable factors. R. C. TAK

  10. R. C. TAK

  11. Relationship Between TP & MP • When Total product increases at an increasing rate, marginal product also increases • When total product increases at a diminishing rate, marginal product declines. • When total product reaches its maximum, marginal product becomes zero. • When total product falls, marginal product becomes negative R. C. TAK

  12. Relationship Between AP & MP • When MP is greater than the AP, the AP rises. • When MP becomes equal to AP, then AP reaches its maximum • When MP is less than the AP, then AP starts declining. R. C. TAK

  13. Know yourself: 1. When total product of a variable factor falls what will happen to its marginal product? 2. State whether the following statement is true or false. Give reason for your answer “Total product always increase whether there is increasing returns or diminishing returns to a factor.” 3. Assuming a fixed factor and a variable factor draw up total product, average product and marginal product curves with their typical shapes in a single diagram. Divide the diagram into three regions showing different stages about the behaviours of output. 4. Explain the law of returns to a factor with the help of total product and marginal product schedule. 5.Explain the relationship between (A) TP & MP (B) AP & MP R. C. TAK

  14. Reference:- 1. NCERT Text Book-Introductory Micro-Economics. 2. Introduction to Micro economic theory - H.L. Ahuja 3. Introductory Micro economics - Dr. B.L. Gupta R. C. TAK

More Related