Law of Variable Proportions

Introduction

Short-run production function refers to law of variable proportions. In the short-run, some factors are kept constant and the amounts of variable factors are changed. How output changes in response to the changes in the variable factors in the short-run is the subject-matter of the law of variable proportions. The classical and the neo-classical economists considered increasing returns, Constant returns and diminishing returns as three independent and separate laws. But modern economists are of the opinion that they are not three separate laws, but three phases of one general law-the Law of Variable Proportions.

Definition of the Law

 “As equal increments of a variable factor are combined with a given quantity of fixed factors, the marginal and average product of the variable factor will eventually decrease.”

According to Boulding, “As we increase the quantity of any one input which is combined with fixed quantity of other inputs, the marginal physical productivity of the variable input must eventually decline.”

Assumption

        The law of variable proportions is based on the following assumptions

• The technique of production is given &remains constant.
• The units of variable factor are homogeneous, i.e. equal in efficiency.
• There are some inputs whose quantities are held constant.
• It is possible to vary the proportions in which the various factors can be combined to produce a product.
• The law assumes short-run.