Q.Distinguish between Total Product, Average Product and Marginal Product.
Concept understanding — Law of Variable Proportions
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 shape of the total product curve — it first rises steeply, then flattens, then bends downward.
A common mistake: students think the law says "output always falls after some point." No — it says marginal product eventually falls. Total output can still rise (Stage 2), but at a decreasing rate.
The Diagram (Describe It in Words)
Draw a graph with labour (units) on the x-axis and output on the y-axis.
- Total Product (TP) curve: Starts at origin, rises steeply (Stage 1), then rises more slowly (Stage 2), then peaks and starts falling (Stage 3).
- Marginal Product (MP) curve: Rises in Stage 1, peaks at the end of Stage 1, then falls through Stage 2, crosses zero at the start of Stage 3, and becomes negative.
The point where MP = 0 is exactly where TP is maximum.
The Bottom Line
The Law of Variable Proportions is not a theory — it's an observed fact about production. It tells us that there is no free lunch from endlessly adding one input. Every production process has a fixed factor, and that fixed factor eventually becomes a bottleneck.
Marginal Product = ΔVariable InputΔTotal Product
Where Δ means "change in." The law says that beyond some point, each successive Δ in variable input yields a smaller Δ in total product.
For your exams: remember the three stages, the shape of the TP and MP curves, and the reason — the fixed factor becomes over-utilised. That's the core.
TP, AP and MP are the three measures used to track how output responds as units of a variable factor are added to a fixed factor.
TP is total output; AP is output per unit of the variable factor (TP/L); MP is the addition to TP from the last unit (TPn−TPn−1).
TP = total output; AP=TP/L; MPn=TPn−TPn−1.
Total Product (TP) is the total quantity of output produced by a given number of units of the variable factor, holding the fixed factor constant. Average Product (AP) is output per unit of the variable factor, AP=LTP — it measures the average productivity of the variable factor. Marginal Product (MP) is the addition to total product caused by employing one more unit of the variable factor, MPn=TPn−TPn−1 — it measures the productivity of only the last unit added.
The three are mathematically linked: MP is derived from the change in TP, and AP rises whenever MP is greater than AP, and falls whenever MP is less than AP — so MP always intersects AP exactly at AP's maximum point. TP keeps rising as long as MP is positive (even while MP itself is falling) and only starts falling once MP turns negative.
TP is total output; AP=TP/L is output per unit; MPn=TPn−TPn−1 is output added by the last unit; MP crosses AP at AP's maximum.
Students often think TP must fall as soon as MP starts falling — TP keeps rising throughout Stage II because MP is still positive there, even though it is declining; TP only turns down in Stage III when MP becomes negative.
Showing the 12 most recent of 16 on this concept.
- CA Foundation 2026Set jan-20261 markMCQQ.Which of the following is not true with regard to stage of diminishing returns? (A) Total product continues to decrease (B) Both marginal product and average product of the variable factor are diminishing but are positive (C) A rational producer will seek to produce within the range of this stage (D) By the end of this stage, total product reaches its maximum
›Reveal solutionSolution
During diminishing returns (Stage II) total product still increases at a diminishing rate; it does not decrease, so statement (A) is not true.
The three stages of the Law of Variable Proportions
- Stage I (increasing returns): MP rises then AP rises; TP increases at an increasing rate.
- Stage II (diminishing returns): both MP and AP are falling but remain positive; TP continues to increase but at a diminishing rate, and by the end of this stage TP reaches its maximum (where MP = 0). A rational producer operates in this stage.
- Stage III (negative returns): MP becomes negative and TP actually falls.
Applying it
- (B), (C) and (D) are all correct features of Stage II.
- (A) — 'Total product continues to decrease' — describes Stage III, not the diminishing-returns stage, and is therefore the untrue statement.
Watch outThe question asks which statement is not true. Falling TP happens in Stage III (negative returns), not Stage II (diminishing returns) — don't blur the two stages together.
TipIn diminishing returns, watch the rate: TP still rises but more slowly, MP and AP fall yet stay positive. Only when MP turns negative does TP fall.
✓Final answer(A) Total product continues to decrease
- CA Foundation 2026Set may-20261 markMCQQ.The three stages of the law of variable proportion can be referred to as the stages of __________. (A) Increasing returns, optimum returns & nil returns (B) Positive returns, diminishing returns & nil returns (C) Increasing returns, diminishing returns & negative returns (D) Negative returns, nil returns & positive returns
›Reveal solutionSolution
The three stages of the law of variable proportions are increasing returns, diminishing returns and negative returns.
Step 1 — The law
As successive units of a variable input are added to fixed inputs, the marginal product first rises, then falls, and finally becomes negative. This gives three stages:
Step 2 — The three stages
- Stage I — Increasing returns: total product increases at an increasing rate; marginal product rises.
- Stage II — Diminishing returns: total product increases at a decreasing rate; marginal product falls but stays positive. (A rational producer operates here.)
- Stage III — Negative returns: additional input reduces total product; marginal product becomes negative.
Step 3 — Why the other options are wrong
- (A) "optimum/nil returns" and (B)/(D) mix in "positive/nil returns" — these are not the standard three-stage names. Only (C) uses the correct sequence.
Watch outStage II is diminishing (positive) returns, not "nil" returns — output still rises, just more slowly. The final stage is negative, where output falls.
TipRemember the arc: up fast → up slow → down = increasing, diminishing, negative returns.
✓Final answer(C) Increasing returns, diminishing returns & negative returns
- CA Foundation 2025Set jan-20251 markMCQQ.What will be the average product when quantity of labour is 6 ? (A) 9 (B) 10 (C) 11 (D) 12
›Reveal solutionSolution
Reconstruct the schedule: at L = 6, TP = 60, so AP = 60/6 = 10.
Step 1 — Rules linking TP, AP and MP
AP=LTP,MPn=TPn−TPn−1
Step 2 — Fill the product schedule step by step
Starting from the given entries (TP₁ = 10, MP₂ = 11, AP₃ = 11, MP₄ = 11, TP₅ = 52, MP₆ = 8):
Labour (L) Total Product (TP) Average Product (AP) Marginal Product (MP) 1 10 10 – 2 21 10.5 11 3 33 11 12 4 44 11 11 5 52 10.4 8 6 60 10 8 - TP₂ = 10 + 11 = 21; TP₃ = AP₃ × 3 = 33; TP₄ = 33 + 11 = 44; TP₅ = 52 (given); TP₆ = 52 + 8 = 60.
Step 3 — Read off AP at L = 6
AP6=6TP6=660=10
Watch outYou cannot get AP at L = 6 without first finding TP₆. Use MP₆ = 8 added to TP₅ = 52 to get TP₆ = 60; skipping this gives a wrong AP.
TipBuild the whole table once using AP = TP/L and MP = ΔTP; then Q18–Q20 (AP₆, TP₄, MP₅) are all just read off the same completed schedule.
✓Final answer(B) 10
- CA Foundation 2025Set jan-20251 markMCQQ.What will be the total product when quantity of labour is 4 ? (A) 38 (B) 40 (C) 42 (D) 44
›Reveal solutionSolution
Cumulate the schedule: TP₄ = TP₃ (33) + MP₄ (11) = 44.
Step 1 — Relationship used
TPn=TPn−1+MPn,AP=LTP
Step 2 — Reconstruct up to L = 4
Labour (L) Total Product (TP) How obtained 1 10 given 2 21 10 + MP₂(11) 3 33 AP₃(11) × 3 4 44 33 + MP₄(11) Step 3 — State the answer
TP4=33+11=44
We can cross-check: AP₄ = 44/4 = 11, consistent with the schedule's pattern.
Watch outTP₃ must be found from AP₃ = 11 (so TP₃ = 33) before adding MP₄. Forgetting the AP-to-TP step (TP = AP × L) leads to a wrong TP₄.
TipConvert an AP entry to TP with TP = AP × L, and a TP entry to MP with MP = ΔTP. Alternate between these to fill any gap.
✓Final answer(D) 44
- CA Foundation 2025Set jan-20251 markMCQQ.What will be the marginal product when quantity of labour is 5 ? (A) 8 (B) 9 (C) 10 (D) 11
›Reveal solutionSolution
MP5=TP5−TP4=52−44=8.
Step 1 — Definition of marginal product
MPn=TPn−TPn−1
MP is the extra output produced by employing one additional unit of labour.
Step 2 — Get the two TP values
From the reconstructed schedule (see Q18/Q19):
Labour (L) Total Product (TP) 4 44 5 52 (given) Step 3 — Compute MP at L = 5
MP5=52−44=8
So the marginal product when the quantity of labour is 5 equals 8.
Watch outMarginal product subtracts consecutive total products (TP₅ − TP₄), not TP₅ divided by 5 — that division would give average product, a different measure.
TipAP = TP/L (a ratio); MP = change in TP (a difference). Keep the two operations distinct and these product-schedule questions are quick.
✓Final answer(A) 8
- CA Foundation 2025Set may-20251 markMCQQ.Which of the following is not true about relationship between average product and marginal product ? (A) When average product rises as a result of an increase in the quantity of variable input marginal product is more than the average product. (B) When average product is maximum, marginal product is equal to average product. (C) When average product falls, marginal product is less than the average product. (D) When average product is negative, marginal product becomes zero.
›Reveal solutionSolution
Average product can never be negative, so statement (D) is the one that is not true.
Step 1 — AP–MP relationships that ARE true
- (A) When AP is rising (as variable input increases), MP > AP — true (MP pulls AP up).
- (B) When AP is at its maximum, MP = AP — true (MP cuts AP at AP's peak).
- (C) When AP is falling, MP < AP — true (MP pulls AP down).
Step 2 — Why (D) is false
AP=LTP
As long as total product (TP) is positive and the number of units of the variable input (L) is positive, AP is always positive — it cannot become negative. Marginal product can become negative (when TP falls), but average product cannot. So a statement premised on "average product is negative" is impossible, making (D) not true.
Watch outDon't confuse MP and AP: MP can go negative (Stage 3), but AP never does. The statement wrongly attaches negativity to AP.
TipAP = TP ÷ units; both are non-negative, so AP stays positive. Any claim of negative AP is automatically false.
✓Final answer(D) When average product is negative, marginal product becomes zero.
- CA Foundation 2025Set may-20251 markMCQQ.Total product starts declining in which stage of production ? (A) Stage 1 : The stage of increasing returns (B) Stage 2 : The stage of diminishing returns (C) Stage 3 : The stage of negative returns (D) It may decline in any stage of production
›Reveal solutionSolution
Total product actually declines only in Stage 3 (negative returns), where marginal product is negative → (C).
Step 1 — The three stages (law of variable proportions)
- Stage 1 — increasing returns: TP rises at an increasing rate; MP rising.
- Stage 2 — diminishing returns: TP rises at a decreasing rate and reaches its maximum at the end of this stage; MP positive but falling to zero.
- Stage 3 — negative returns: MP becomes negative, so TP actually falls.
Step 2 — Locate where TP declines
TP is still increasing (or at its peak) through Stages 1 and 2. It starts declining only when MP turns negative — that is Stage 3.
Step 3 — Reject the others
- (A) Stage 1 — TP rising fast.
- (B) Stage 2 — TP still rising, then at maximum.
- (D) Any stage — wrong; the decline is specific to Stage 3.
Watch outTP is at its maximum at the end of Stage 2, but it does not decline until Stage 3 (when MP < 0). Don't pick Stage 2 for the decline.
TipTP falls exactly when MP goes negative → Stage 3, negative returns.
✓Final answer(C) Stage 3 : The stage of negative returns
- CA Foundation 2025Set may-20251 markMCQQ.Use the following data to answer question 24-25 :Diminishing marginal returns start to occur between units : (A) 1 and 2 (B) 2 and 3 (C) 3 and 4 (D) 4 and 5
Output (Q) 0 1 2 3 4 5 Total cost (TC) ₹ 200 ₹ 310 ₹ 410 ₹ 500 ₹ 604 ₹ 710 ›Reveal solutionSolution
Diminishing marginal returns begin where marginal cost stops falling and starts rising — here between the 3rd and 4th units.
Step 1 — Compute marginal cost for each unit
MC = change in TC per extra unit:
Unit TC MC (ΔTC) 1 310 110 2 410 100 3 500 90 4 604 104 5 710 106 Step 2 — Link MC to marginal returns
Falling MC ⇔ rising marginal product (increasing marginal returns); rising MC ⇔ falling marginal product (diminishing marginal returns). MC declines 110 → 100 → 90 through the 3rd unit, then RISES to 104 at the 4th unit.
Step 3 — Locate the turning point
The reversal — MC's minimum at unit 3, then upward — occurs between units 3 and 4, so diminishing marginal returns start there.
Why the other options are wrong
- (A) 1 and 2 and (B) 2 and 3 are still in the falling-MC (increasing-returns) region.
- (D) 4 and 5 is after diminishing returns have already begun.
Watch outDiminishing returns start when MC first turns UP, not merely when MC is high. Track the lowest MC (90 at unit 3) and mark the very next unit.
TipTabulate ΔTC and find where the number stops decreasing — that boundary is your answer.
✓Final answer(C) 3 and 4
- CA Foundation 2025Set sep-20251 markMCQQ.When average product rises as a result of an increase in the quantity of variable input, marginal product is : (A) less than the average product (B) minimum (C) equal to the average product (D) more than the average product
›Reveal solutionSolution
AP rises only when MP is above AP; so a rising AP ⇒ MP > AP.
Step 1 — Recall the MP–AP relationship
Marginal product pulls the average up or down like a running average:
- When MP>AP, AP is rising.
- When MP=AP, AP is at its maximum.
- When MP<AP, AP is falling.
Step 2 — Apply to the stated case
We are told AP rises as the variable input increases. From the relationship above, AP can only rise while marginal product exceeds average product. Hence MP is more than AP.
Watch outMP = AP only at AP's peak (option C), not while AP is still rising. Don't pick the maximum-point condition for a rising AP.
TipThink of a batting average: a new score above your average pulls it up ⇒ marginal above average.
✓Final answer(D) more than the average product
- CA Foundation 2025Set sep-20251 markMCQQ.Based on the information given in the following table, answer the Questions Nos. 18 to 20 : Product ScheduleWhat will be the average product when the quantity of labour is 3 ? (A) 22 (B) 24 (C) 20 (D) 18
Quantity of labour Total Product (TP) Average Product (AP) Marginal Product (MP) 0 0 – – 1 – – 20 2 – – 26 3 66 – – 4 – 19 – 5 – – 4 ›Reveal solutionSolution
AP at L = 3 is TP ÷ L = 66 ÷ 3 = 22.
Step 1 — Read the total product at L = 3
The schedule directly gives TP=66 when the quantity of labour is 3.
Step 2 — Apply the average product formula
AP=LTP=366=22
For completeness, filling the whole schedule: TP is 0, 20, 46, 66, 76, 80 for L = 0…5 (using the given MP and AP values), which confirms AP3=22.
Watch outUse total product ÷ labour, not marginal product. Dividing an MP figure here would give a wrong answer.
TipAP = TP / L — the simplest ratio in the whole schedule.
✓Final answer(A) 22
- CA Foundation 2025Set sep-20251 markMCQQ.Based on the information given in the following table, answer the Questions Nos. 18 to 20 : Product ScheduleWhat will be the total product when the quantity of labour is 5 ? (A) 86 (B) 84 (C) 80 (D) 92
Quantity of labour Total Product (TP) Average Product (AP) Marginal Product (MP) 0 0 – – 1 – – 20 2 – – 26 3 66 – – 4 – 19 – 5 – – 4 ›Reveal solutionSolution
TP₄ = AP₄ × 4 = 76; add MP₅ = 4 ⇒ TP₅ = 76 + 4 = 80.
Step 1 — Find TP at L = 4
Average product at L = 4 is given as 19, so
TP4=AP4×L=19×4=76
Step 2 — Add the marginal product of the 5th unit
Marginal product at L = 5 is given as 4, so
TP5=TP4+MP5=76+4=80
The completed TP column (0, 20, 46, 66, 76, 80) confirms this.
Watch outTP₅ is not AP₄ (19) or any single figure in the table — you must chain TP₄ (from AP) with MP₅. Skipping the AP-to-TP step is the common slip.
TipRemember TP=AP×L and TPn=TPn−1+MPn — the two links that solve the whole table.
✓Final answer(C) 80
- CA Foundation 2025Set sep-20251 markMCQQ.Based on the information given in the following table, answer the Questions Nos. 18 to 20 : Product ScheduleWhat will be the marginal product when the quantity of labour is 4 ? (A) 26 (B) 20 (C) 10 (D) 19
Quantity of labour Total Product (TP) Average Product (AP) Marginal Product (MP) 0 0 – – 1 – – 20 2 – – 26 3 66 – – 4 – 19 – 5 – – 4 ›Reveal solutionSolution
MP₄ = TP₄ − TP₃ = 76 − 66 = 10.
Step 1 — Get the two total products
- At L = 3: TP3=66 (given).
- At L = 4: AP4=19, so TP4=19×4=76.
Step 2 — Compute the marginal product
MP4=TP4−TP3=76−66=10
Marginal product is the extra output from the 4th unit of labour, which is 10.
Watch outDon't read 19 (that is AP₄, option D) as the marginal product. MP is the change in TP, so you must subtract TP₃ from TP₄.
TipMP always = current TP − previous TP.
✓Final answer(C) 10
🎓Unlock everything free for 14 days
- ✓Full step-by-step solutions
- ✓Concept-first explanations
- ✓Methods, shortcuts & mistakes
- ✓PYQ mapping + timed mock tests
Full access for 14 days. No credit card required.