ASSUMPTIONS OF THE LAW OF VARIABLE PROPORTIONS
The law of variable propotions, as stated above,
2. Stigler, GJ. -Theory a/price, 1953,
3. Samuelson, P.A..-Economlcs, 8th Ed. p.2S.
4. Benham, F.. Economics, 1960, P.1I0.
5. Boulding, K.E. -Principles of Economics
holds true under certain conditions. The following are its main assumptions:(a) It is assumed that the state of technology remains unaltered. It is obvious that improvements in technology are bound to raise the marginal and average product and they will not diminish as the law says. (b) It is also assumed that of the various inputs employed in production some at least must be kept constant. This is so because only in this way we can change the factor proportions and find out its effects on the output. Hence this law does not apply where all factors of production are proportionately varied, Behaviour of output when all inputs are varied comes
under, ‘returns to scale’ wh ich we shall discuss later.(c) The law of variable proportions is clearly based upon the possibility of varying proportions in which the various factors are combined in production. It does not apply to cases where the factors have to be used in fixed proportions to yield fixed products. Incases where the various factors are to be used in rigidly fixed proportions, the increase in one factor would not .Iead to any increase in input, that is, the marginal product of the factor will be zero and not diminishing.But such cases are very uncommon and hence the law of variable proportions has almost a universal application.
(or outputs) from the table on page 190, we can discover certain unique relationship between them: (1) So long as the marginal return exceeds theaverage return (see columns 3 and 4), each new average return will be larger than the previous one, i.e.,
the average output continues to increase. Conversely, if average output is ri ing, it can be safely concluded that the marginal output is larger than the output. (2) When the marginal return goes.below the average return, average tput begins to decline. This is so, because the new marginal retum, which is lower, brings down the average.1b.at U, when the average product is decreasing, the marginal product is les than the average product. (3) The average output remains constant whenthe marginal and average returns are equal. Conversely, ‘if the average output remains constant, it can be inferred that the margina output i constant and-thetwo are equal. Also, when the avera e product is maximum, marginal product equals average product. In such cases, the average and marginal curves coincide and they arc horizontal, parallel to the X-axi