Explain the Law of Variable Proportion with the Help of Total and Marginal Physical Product?

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Detailed Solution

The law of variable proportion, also known as the law of diminishing returns, states that as more units of one factor of production (like labor) are added to a fixed amount of other factors (like capital), the marginal product (additional output) initially increases, then starts to decrease after a certain point.

The total physical product (TPP) is the total amount of output produced by a combination of inputs. Marginal physical product (MPP) refers to the additional output generated by adding one more unit of a variable factor, holding other factors constant.

According to the law of variable proportion:

Initially, as more workers are added, the total output increases at an increasing rate.
After a certain point, the total output continues to increase, but at a decreasing rate (diminishing returns).
Eventually, the addition of more workers may lead to a decrease in total output due to overcrowding or inefficiency.

This law helps businesses and economists understand how to optimize the use of resources to maximize production.

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