Q.Discuss the law of variable proportions with the help of a diagram. OR Discuss Average Fixed Cost and Average Variable Cost with the help of diagrams.
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The Law of Variable Proportions: Why Adding More of One Thing Eventually Backfires
The Everyday Intuition
Imagine you're making chai for your family. You have one stove, one kettle, and one burner. You start with one person making tea — that's fine. Now you add a second person to help. Things speed up: one boils water, the other gets cups ready. Add a third person — maybe they help with sugar and milk. Still good.
Now add a fourth person. They're standing around, bumping elbows. A fifth? They're just getting in the way. The sixth person? They're actually slowing down the whole process because there's no space, no extra stove, no extra work to do.
That's the Law of Variable Proportions in a nutshell: as you keep adding more of one input (like labour) to a fixed input (like the stove), the extra output you get from each additional worker first rises, then stays constant, and eventually falls — even turning negative.
The Precise Meaning (NCERT Style)
In economics, production requires factors of production — land, labour, capital, and entrepreneurship. The Law of Variable Proportions (also called the Law of Diminishing Returns) applies when:
- One factor is variable (you can change its quantity, e.g., labour)
- All other factors are fixed (e.g., land, machinery, factory size)
The law states that as you increase the variable factor, keeping others constant, the marginal product (extra output from one more unit of the variable factor) will eventually decline.
The law has three stages:
- Increasing returns — Marginal product rises (each new worker adds more than the previous one)
- Diminishing returns — Marginal product falls but remains positive
- Negative returns — Marginal product becomes negative (adding more workers actually reduces total output)
The Three Stages in Detail
Let's use a concrete example from NCERT: a farmer with a fixed plot of land (1 acre) who hires more and more workers.
| Number of Workers | Total Output (kg wheat) | Marginal Product (kg per worker) |
|---|---|---|
| 0 | 0 | — |
| 1 | 10 | 10 |
| 2 | 24 | 14 |
| 3 | 39 | 15 |
| 4 | 50 | 11 |
| 5 | 58 | 8 |
| 6 | 63 | 5 |
| 7 | 63 | 0 |
| 8 | 60 | –3 |
Stage 1 (Increasing Returns): Workers 1 to 3. Each new worker adds more than the last. Why? Because with few workers, they can specialise — one digs, one sows, one waters. The fixed land is underutilised, so each extra worker makes fuller use of it.
Stage 2 (Diminishing Returns): Workers 4 to 7. Each new worker still adds output, but less and less. The land is now being used more intensively, but there's only so much space. Workers start getting in each other's way.
Stage 3 (Negative Returns): Worker 8. Total output actually falls. Too many workers on the same plot — they trample crops, waste time coordinating, and create chaos.
A rational producer will never operate in Stage 3 (negative returns) and will stop before Stage 2 ends — because once marginal product becomes zero, adding more workers reduces total output.
Why It Matters
This law is the foundation of production theory in economics. It explains:
- Why firms don't just keep hiring more workers — at some point, the extra cost of a worker exceeds the extra revenue they generate.
- Why agriculture in densely populated countries faces limits — you can't keep adding labour to the same land and expect proportional increases in food. …
The law of variable proportions describes how total and marginal product behave in the short run as one variable factor is increased, through three stages. (The alternative discusses Average Fixed Cost — a falling rectangular hyperbola — and Average Variable Cost — a U-shaped curve.) …
Law of variable proportions: MP of the variable factor rises, then diminishes, then turns negative (three stages). [OR] AFC falls continuously as a rectangular hyperbola; AVC is U-shaped.
Option 1 — Law of Variable Proportions:
The law states that in the short run, when more and more units of a variable factor (say labour) are applied to a fixed factor (say land/capital), the marginal product (MP) first increases, then decreases, and finally becomes negative. It operates in three stages:
- Stage I — Increasing returns: Total product (TP) rises at an increasing rate and MP rises. This is due to better utilisation of the fixed factor and division of labour.
- Stage II — Diminishing returns: TP rises but at a decreasing rate; MP falls yet remains positive until TP is maximum (where MP = 0). A rational producer operates in this stage.
- Stage III — Negative returns: TP begins to fall and MP becomes negative, as too many units of the variable factor are crowded onto the fixed factor.
Diagram (described): With units of the variable factor on the X-axis and product on the Y-axis, the TP curve rises, reaches a maximum and then falls; the MP curve rises, falls, cuts the X-axis (MP = 0 at maximum TP) and then goes below it.
Option 2 — Average Fixed Cost and Average Variable Cost:
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Showing the 12 most recent of 20 on this concept.
- CBSE 2026Set MARCH1 markMCQQ.Product obtained from additional factors of production is termed as(a) Marginal product(b) Total product(c) Average product(d) Annual product
›Reveal solutionSolution
The product from an additional factor unit is the marginal product — option (a).
In production analysis (law of variable proportions), three product concepts are used:
- Total product (TP) — the total output produced by all units of the variable factor together.
- Marginal product (MP) — the addition to total product when one more unit of the variable factor is employed, other factors held constant. MP = change in TP / change in the variable input.
- Average product (AP) — total product divided by the number of units of the variable factor (TP / units). …
- CBSE 2026Set ANNUAL1 markMCQQ.Read the following both statements and choose the correct option : Assertion (A) : When the marginal product is zero, the total product is constant. Reason (R) : The marginal product measures the change in total product.(a) Both A and R are correct and R is the correct explanation of A.(b) Both A and R are correct but R is not the correct explanation of A.(c) A is correct but R is incorrect.(d) Both A and R are incorrect.(a) Both A and R are correct and R is the correct explanation of A.(b) Both A and R are correct but R is not the correct explanation of A.(c) A is correct but R is incorrect.(d) Both A and R are incorrect.
›Reveal solutionSolution
Both statements are true, and the definitional link between MP and the change in TP directly explains why MP = 0 implies TP is (momentarily) constant.
Assertion: 'When the marginal product is zero, the total product is constant' — TRUE at that specific point: since MP = ΔTP/ΔL (the change in Total Product per additional unit of the variable factor), MP = 0 means ΔTP = 0, i.e., Total Product has stopped changing at exactly that unit of input — this is the single point where TP is at its maximum (neither rising nor about to fall from that exact unit's addition).
Reason: 'The marginal product measures the change in total product' — TRUE; this is the precise definition of Marginal Product (MP = ΔTP/ΔInput).
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- CBSE 2025Set ANNUAL1 markMCQQ.Which of the following laws explains the short-run production function? (A) Law of demand (B) Law of variable proportion (C) Law of returns to scale (D) Elasticity of demand
›Reveal solutionSolution
The short-run production function is explained by the Law of Variable Proportions, so the answer is (B).
In the short run some factors (like land or plant) are fixed while others (like labour) are variable, so the factor proportions change as more of the variable factor is applied to the fixed factor. The Law of Variable Proportions describes exactly this: as successive units of a variable factor are added to a fixed factor, total product first rises at an increasing rate, then at a diminishing rate, and may finally fall. The Law of Returns to Scale (C) appl …
- CBSE 2025Set ANNUAL1 markMCQQ.In which stage of production a rational producer likes to operate in the condition short-run production? (A) First stage (B) Second stage (C) Third stage (D) None of these
›Reveal solutionSolution
A rational producer operates in the second stage of production, so the answer is (B).
The Law of Variable Proportions has three stages. In Stage I (increasing returns) the average product keeps rising, meaning the fixed factor is under-utilised, so it is not optimal to stop here. In Stage III (negative returns) marginal product becomes negative and total product falls, so producing here is irrational. In Stage II (diminishing but positive returns) total product is still increasing and marginal product, though declining, …
- CBSE 2025Set ANNUAL1 markMCQQ.Which factors among the following we find in short-run production process? (A) Fixed factors (B) Variable factors (C) Both (A) and (B) (D) None of these
›Reveal solutionSolution
Short-run production uses both fixed and variable factors, so the answer is (C).
The short run is a time period too short to change all inputs. In it, at least one factor (such as plant, machinery or land) is fixed, while other factors (such as labour, raw material and power) can be varied to change output. This co-existence of fixed and variable factors is exactly why the Law of Variable Proportions operates in the …
- CBSE 2025Set ANNUAL1 markMCQQ.Which of the following factors are there in short-run production process? (A) Fixed factors (B) Variable factors (C) Both (A) and (B) (D) None of these
›Reveal solutionSolution
In the short run a firm has both fixed factors and variable factors, so the answer is (C) Both (A) and (B).
Economists classify the production period by how freely inputs can be changed. In the short run, the quantity of some inputs cannot be altered — these are the fixed factors (for example, plant, building, heavy machinery). Other inputs can be freely increased or decreased with the level of output — these are the variable factors (for example, labour, raw material, power).
…
- CBSE 2024Set MARCH1 markMCQQ.Formula for calculating AP is :(a) TP/MP(b) ΔTP/N(c) TP/N(d) ΔTP/ΔN
›Reveal solutionSolution
The correct option is (c) TP/N: AP = total product ÷ units of the factor.
Average product (AP) is the output per unit of the variable factor. It is found by dividing total product (TP) by the number of units (N) of the variable factor employed: AP = TP/N.
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- CBSE 2024Set ANNUAL1 markMCQQ.Which factor(s) among the following do we find in short-run production process? (A) Fixed factor (B) Variable factor (C) Both (A) and (B) (D) None of these
›Reveal solutionSolution
The short-run production process has both fixed and variable factors, so the answer is (C).
In the BSEB Inter Class-12 Economics syllabus, the short run is defined as the period in which at least one factor of production is fixed (e.g. plant, machinery) while others are variable (e.g. raw material, labour). Production in the short run therefore involves both fixed and variable factors together — this …
- CBSE 2024Set ANNUAL1 markMCQQ.Law of variable proportion is related to (A) Long-run (B) Short-run (C) Both (A) and (B) (D) Very long-run
›Reveal solutionSolution
The law of variable proportions operates in the short run, so the answer is (B).
In the BSEB Inter Class-12 Economics syllabus, the law of variable proportions (returns to a variable factor) describes how total, average and marginal product change when one factor is increased while other factors are kept fixed. This is possible only in the short run, where at least one factor is …
- CBSE 2024Set ANNUAL1 markMCQQ.Labour is an example of:(a) A fixed factor(b) A variable factor(c) demand(d) supply
›Reveal solutionSolution
Labour is an example of a variable factor — option (b).
In the short run, factors of production are of two kinds:
- Fixed factors – whose quantity cannot be changed in the short run (e.g., plant, machinery, factory building).
- Variable factors – whose quantity can be readily changed with the level of output (e.g., labour, raw materials, power). …
- CBSE 2023Set ANNUAL1 markMCQQ.The value of Change in output / Change in input is-(a) Total Product(b) Average product(c) Marginal Product(d) None of these(a) Total Product(b) Average product(c) Marginal Product(d) None of these
›Reveal solutionSolution
Marginal Product = Change in output ÷ Change in input.
Total Product (TP) is the overall quantity of output produced by all units of the variable factor together. Average Product (AP) = TP ÷ number of units of the variable factor. Marginal Product (MP), by contrast, specifically measures the ADDITIONAL output from the LAST unit of the variable input added, calculated as MP = ΔTP/ΔL (change in total product divided by change in labour/input units). It is this measure — the ratio of change in output t …
- CBSE 2023Set ANNUAL1 markQ.What the factor is called, which the firm can vary in the short run?
›Reveal solutionSolution
The factor a firm can change in the short run is the Variable Factor.
In the short run, a firm operates with a given plant/capital size that cannot be altered quickly — this is the Fixed Factor. However, the firm CAN change the quantity of certain other inputs — most commonly labour and raw materials — within this same short period to adjust its output level; such an input is called the Variable Factor. The behaviour of output as the variable factor is changed, …
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