Laws of Variable Proportion - SS2 Economics Lesson Note

The law of variable proportions is also known as the law of diminishing returns, and it states that as you increase the amount of one input while keeping all other inputs constant, the output will eventually increase at a decreasing rate. In other words, at some point, adding more of a particular input will no longer result in a proportional increase in output.

For example, let's say you have a factory that produces flashlights, and you have a fixed amount of machinery and workers. If you increase the number of workers while keeping the amount of machinery constant, the output of flashlights will increase. However, at some point, adding more workers will not result in a proportional increase in the number of flashlights produced. This is because the machinery can only handle a certain amount of work, and adding more workers beyond that point will not increase productivity.

The law of variable proportions is important in economics because it helps us understand how changes in inputs affect output, and how firms can make their production processes efficient and profitable.