Q3 of 20 Page 3

State the law of variable proportions.


Law of variable proportions or Returns to a factor shows the behaviour of total product in the short run. Here, keeping other factors constant when you increase a variable factor then the total product initially increases at an increasing rate, then it increases at a diminishing rate and finally, it starts declining. This law only operates in short run because in the long run there is no distinction made between fixed and variable factors.


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