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Rajeev is a farmer who produces paddy in his 10 acres of land. He is trying to increase his total output by increasing the quantity of only one of his inputs – say labour. Which law of production explains this situation? What will be the effect on his total output? Give your suggestion to Rajeev with a suitable diagram.

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Law of Variable Proportions The law of diminishing marginal product says that if we keep increasing the employment of an input, with other inputs fixed, eventually a point will be reached after which the resulting addition to output will start falling. A somewhat related concept with the law of diminishing marginal products is the law of variable proportions. It says that the marginal product of a factor input initially rises with its employment level. But after reaching a certain level of employment, it starts falling.

The reason behind the law of diminishing returns or the law of variable proportion is the following. As we hold one factor input fixed and keep increasing the other, the factor proportions change. Initially, as we increase the amount of the variable input, the factor proportions become more and more suitable for the production and marginal product increases. But after a certain level of employment, the production process becomes too crowded with the variable input and the factor proportions become less and less suitable for the production. It is from this point that the marginal product of the variable input starts falling. Since inputs cannot take negative values, marginal product is undefined at zero level of input employment. Marginal products are additions to total product. For any level of employment of an input, the sum of marginal products of every unit of that input up to that level gives the total product of that input at that employment level. Therefore, total product is the sum of marginal products. Average product of an input at any level of employment is the average of ail marginal products up to that level. Average and marginal products are often referred to as average and marginal returns, respectively, to the variable input. The marginal product (MP) and total product (TP) of an input are related.

The points of relationship are given below. 

(i) When MP increases, TP also increases 

(ii) When MP is zero, TP becomes maximum 

(iii) When MP becomes negative, TP turns negative 

The relationship between MP and TP are picturised below

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