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Microeconomic Theory
Notes workers is increased to 10 then this ratio of land and service would be 1:1. This clarifies that one
worker is less productive from one hectare of land against two hectares of land. So the marginal
production will be low if the ratio of variable factor (worker) is less than the land (fixed factor).
3. Imperfect Substitute: According to Ms. Joan Robinson, the main reason of law of variable
proportion is imperfect substitute of factors in production. A factor cannot replace another at all.
If the replacement was possible then after using the optimum level of fixed factors, it could be
increased by using variable factors. In this situation, the increase of production was possible in the
first attempt. But this is not possible in the real life situation. So there is no replacement of one factor
with another in production. So when the ratio of fixed and variable products is not matching then
the marginal rate of product reduces for the changing factors.
8.8 Postponement of the Law
The postponement of law of variable Proportions can be following—
(i) Improvement in Technique of Production: This
law can be postponed by improving production The Law of Variable Proportions cannot be
techniques. In other words, using of improved stopped permanently. This can be stopped for
techniques helps to increase the production and a limited period of time until a new technique
helps to decrease the production cost. By using this, emerges.
law of variable proportion can be stopped.
(ii) If the factors of production are fully changeable, means we can use one factor against another
then this law can be stopped. In this situation, the factor cannot be fixed.
8.9 Returns to a Factor—A Detailed Study of Different Situations
By using variable factors with fixed factors, there are three different situations of production:
Situation 1: Increasing Returns to a Factor
The returns to a factor is a state when total production increases in increasing ratio by using more
numbers of variable factors used with fixed unit of fixed factors. In this condition, the marginal
production of variable factors is increased. In other words, the marginal rate of production is less.
In the words of Benham, “Increasing returns to a factor states that as the proportion of one factor
in a combination of factors is increased upto a point, the marginal productivity of the factor will
increase.”
According to John Robinson, “Law of increasing return states that when an increasing amount of a
factor of production is employed, it generally brings about an improvement in organization. As a
result of it, units of the factor concerned become more efficient and to increase production, it will not
be necessary to increase the physical quantity of the factor in the same proportion.”
The changing and fixing of factors depends upon time period.
Illustration
Increasing Returns to a Factor can identify by Table 1 and Fig. 8.1.
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