Principle Of Variable Proportion

It has three phases: (a) diminishing returns (b) constant returns, and (c) increasing returns Diminishing returns . It is a basic natural law affecting many phases of

management of a farm business. It is a law of fundamental importance in agriculture. This law describes the relationship between output and a variable input when other inputs are held constant. The law can be stated as follows: "If increasing amounts of one input are added to a production process while all other inputs are held constant, the amount of output added per unit of variable input will eventually start decreasing." It states that if the quantity of one factor is increased with quantities of other factors held constant, the marginal increment to the total product may increase or remain constant at first but will eventually decrease after a certain point. The operation of this law can be, however, delayed by improvements in technology and /or improvement in managerial ability. Ultimately this law must operate in the practical world. The level to which yields per acre , milk per cow or weight per poultry bird should be pushed are the kind of questions which involve the law of diminishing returns. It is, thus, an important point in farming to decide the level to which a farmer should push his output per acre or per cow, etc. to secure the maximum possible profit. This principle of returns is also important in specifying how large a farm should be or how much labour and/or machinery be added. In this context resources can be classified as variable resources and fixed resources. For example, an acre would be a fixed resource with the farmer, but fertilizer would be a variable resource. As addition quantities of fertilizer are given to an acre of crop, the return to each additional dose will eventually become lesser and lesser. When diminishing returns hold true, it is seldom profitable to produce a maximum yield per acre or milk or meat per animal, although exceptions might exist.

It can be said that the quantity of a variable resource applied to a fixed acre of land or given head(s) of livestock adds less and less to the yield or output. Examples are application of seeds, fertilizers, irrigation , etc. which have a characteristic of diminishing marginal productivity.