A pizza shop having single oven and one chef is able to produce 50 pizzas per day. When it adds one more chef the output increases to 120 pizzas. Adding 3rd chef output increases to 140 pizzas. This phenomenon is popularly known as

Law of variable proportion

The correct answer is option 1 : Law of variable proportion

The Law of Variable Proportion states that when one factor of production (labor in this case) is increased while keeping other factors (oven) constant, the marginal product (additional output per added worker) initially increases but eventually starts to diminish.

In this case:

• 1 Chef → 50 Pizzas
• 2 Chefs → 120 Pizzas (Increase of 70, increasing returns initially)
• 3 Chefs → 140 Pizzas (Increase of only 20, diminishing marginal returns)

This follows the Law of Variable Proportion, where after a certain point, adding more variable input (chefs) leads to diminishing returns, as the fixed factor (oven) limits production.

Why not the other options?

• Diminishing MRTS (Marginal Rate of Technical Substitution) → Related to input substitution, not production changes with a fixed factor.
• Decreasing Returns to Scale → Applies when all inputs increase, but output increases at a lower rate, which is not the case here.
• Returns to Scale → Refers to long-term production changes when all inputs are varied, not just labor.