A farmer having 4 hectares of land can choose how much labour he wants to use. If he uses only 1 worker, he has too much land for the worker to cultivate alone. As he increases the number of workers, marginal product increases. When the fourth worker is hired, the land begins to get crowded. So the output added by each additional worker is now proportionally less. Hence, marginal product begins to fall.
Which law is described in the above case?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Both (1) and (3)
The farmer keeps his land fixed and adds workers. Marginal product first rises and then falls. This tendency has two names in economics.
Option (1) Law of variable proportions — Correct statement, but it is only one of the correct points, so on its own it is not the answer.
Option (2) Law of returns to scale — Incorrect. Returns to scale is about raising all inputs in the same proportion. Here land stays fixed.
Option (3) Law of diminishing marginal product — Correct statement, but it is only one of the correct points, so on its own it is not the answer.
NCERT (2026-27): “3.4 The Law of Diminishing Marginal Product and the Law of Variable Proportions … Suppose table 3.2 describes the output of a farmer who has 4 hectares of land, and can choose how much labour he wants to use. If he uses only 1 worker, he has too much land for the worker to cultivate alone. As he increases the number of workers, the amount of labour per unit land increases, and each worker adds proportionally more and more to the total output. Marginal product increases in this phase. When the fourth worker is hired, the land begins to get ‘crowded’. Each worker now has insufficient land to work efficiently. So the output added by each additional worker is now proportionally less. The marginal product begins to fall.” “3.4 The Law of Diminishing Marginal Product and the Law of Variable Proportions … Notice that the MP first increases (upto 3 units of labour) and then begins to fall. This tendency of the MP to first increase and then fall is called the law of variable proportions or the law of diminishing marginal product. Law of variable proportions say that the marginal product of a factor input initially rises with its employment level. But after reaching a certain level of employment, it starts falling.” |