A farmer with a fixed area of land hires more workers. At first, the marginal product of labour rises. According to the law of variable proportions, why does this happen?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → The labour-land ratio becomes more suitable for production.
With land fixed, each new worker changes the ratio of labour to land, the factor proportions. At first this ratio becomes more suitable for production, so each extra worker adds more than the last.
Option (1) The land gets crowded with workers. — Incorrect. Crowding comes later. It is why the marginal product falls, not why it rises.
Option (2) The labour-land ratio becomes more suitable for production. — Correct. The factor proportions become more suitable, and marginal product rises.
Option (3) All inputs are being increased in the same proportion as before. — Incorrect. Raising all inputs in the same proportion is returns to scale. Here land stays fixed.
Option (4) Each new worker is paid a lower wage. — Incorrect. Marginal product is extra output. The wage paid does not change it.
NCERT (2026-27): “3.4 The Law of Diminishing Marginal Product and the Law of Variable Proportions … Why does this happen? In order to understand this, we first define the concept of factor proportions. Factor proportions represent the ratio in which the two inputs are combined to produce output. As we hold one factor fixed and keep increasing the other, the factor proportions change. Initially, as we increase the amount of the variable input, the factor proportions become more and more suitable for the production and marginal product increases. But after a certain level of employment, the production process becomes too crowded with the variable input.” |