Law of Variable Proportions.
This law explains the effects on output of variations in factor - proportions.
It refers to the amount of extra output produced by adding to a fixed input more and more of variable input.
There are three stages to the law,
Stage 1: Increasing Returns Stage. The output increases at an increasing rate.
Stage2: Diminishing Returns Stage. The output increases at a diminishing rate.
Stage 3: Negative Returns Stage. The Total Product declines and the marginal product becomes negative cutting the x - axis.
This the Total Product, Marginal Product and Average Product pass through three different stages.
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