Economics Notes on Law of Variable Porportions for SSC Exam

In this article we will discuss about the Law of variable proportion, this topic is important for every competitive exam. This topic will be beneficial for the upcoming SSC CGL Exam.

The Law of Variable Proportions

The law of Variable Proportions states that as we increase the quantity of exactly one input, keeping the other factors of input or production as fixed, the total physical product increases at an increasing rate in the first stage, then it increases at a decreasing rate in the second stage and ultimately it falls in the third stage.

The law of Variable Proportions is divided into three phases. The three phases are:

Phase 1:
TPP increases at an increasing rate. As we keep one factor of input or production as fixed, TPP increases at an increasing rate. In this phase, MPP increases. At early stage, the variable input is so small that the fixed inputs cannot be effectively utilised. But as the quantity of variable input increases, the fixed inputs will be effectively utilised. This is the reason why the MPP increases.

Phase 2:

TPP increases at a decreasing rate. In this stage, TPP increases at an increasing stage, but MPP starts falling but is positive, this means greater than zero. Now as the pressure increases on the fixed inputs, the MPP reduces.

Phase 3:
TPP starts falling. The quantity of variable input becomes too large as compared to the fixed inputs and hence MPP starts falling and also becomes negative. With this TPP also starts falling.

The law of Variable Proportions can be explained with the help of:

• Tabular Representation
• Graphical Representation

Phase 1:

When the variable input is 1, TPP is 10 and MPP is 10.As the variable input rises up to 2, the TPP increases to 29 and MPP are 19. This is the first stage, where TPP increases at an increasing rate and MPP also increases.

Phase 2:

As the variable input rises up to 3, the TPP increases to 44 and MPP are 15. With 4 units of variable input, TPP increases up to 50 and MPP is 6. With 5 units of variable input, TPP is 50 again and MPP is now 0. You can see that as TPP was increasing till 4th unit of variable input, MPP starts falling but is positive. At 5th unit of variable input, TPP attains the maximum point (in this case) at 50 and MPP falls to zero. This is the second stage, where TPP increases at a decreasing rate and MPP starts falling but is positive.

Phase 3:

Now when there are 6 units of variable input, TPP falls to 47 and MPP becomes negative (-3 in this case). This is the last stage where TPP starts falling and MPP becomes negative (falls down below 0).

(Hypothetical Situation has been taken)

Graphical Representation:

In the above diagram, we can see two curves: TPP and MPP. Now let us understand the graphical representation of the law of the Variable Proportions.

• In the first phase, TPP is convex up to point A and MPP is upward sloping. In this phase, TPP increases at an increasing rate and MPP also increases.
• The second phase starts from point A and ends at point B showing the TPP curve to be concave whereas the MPP curve is falling but is positive (above x-axis). In this phase, TPP increases at a decreasing rate, MPP falls but is positive. TPP attains maximum value at point B and at this point MPP becomes zero.
• The third phase starts after point B. In this, TPP falls down and MPP becomes negative (falls below x-axis).

Have a nice day:

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