Page 169 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Microeconomic Theory

Notes
Table 4: Three Stage of Production
Units of Land Units of Total Marginal Stages
(in hector) Labour Production Production
1 1 2 2 First Stage: MP increases, TP
1 2 5 3 increases by increasing rate
1 3 9 4
1 4 12 3 Second Stage: MP Decreases,
1 5 14 2 TP increases by decreasing rate
1 6 15 1
1 7 15 0
Third Stage: MP is negative, TP
1 8 14 –1
decreases
Note: End of Stage One is Start of Stage Two: End of Stage Two is Start of Stage Three.
The Table 4 clarifies that as the inputs of variable factors increase in the first stage, the marginal
production increases. Thus, TP increases in increasing rate.
In second stage, the marginal production decreases by inputs of variable factors. Thus, TP increases in
decreasing rate.
In third stage, the marginal production gets negative by inputs of variable factors. Thus the total
production gets declined. In Fig. 8.4, by using variable inputs of OL units, MP increases. This

Fig. 8.4

Y
Point of Inflexion Y

Total Product J Stage II Stage III
TP

O Stage I L K
X
Y Stage I Stage II Stage III
Increasing Diminishing Negative
Returns
Returns
Returns
Marginal Product E

O X
L K MP
Units of the Variable Factor

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