# What is the difference between law of variable proportions and law of returns to scale?

## What is the difference between law of variable proportions and law of returns to scale?

The difference between returns to a variable factor and returns to scale are summed up as below: (i) In the former (returns to a variable factor) only one factor is changed keeping other factors fixed whereas in the latter (returns to scale), all the factors are changed in the same proportion.

Returns to the scale refers to the change in the output when all the factors of production are increased simultaneously in the same proportion. Whereas, the returns to variable factor refers to the change in output when one factor of production is changed while all other factors are kept constant.

The law of returns to scale explains the proportional change in output with respect to proportional change in inputs. In other words, the law of returns to scale states when there are a proportionate change in the amounts of inputs, the behavior of output also changes.

Is law of variable proportions same as law of diminishing returns?

Both refer to the same concept. Law of variable proportions is the new name for the “Law of diminishing product/returns” of classical economics. It holds that if a firm keeps increasing an input keeping all other inputs and technology constant, corresponding increase in output will decrease eventually.

## How are the laws of returns to scale different from the laws of variable proportions What are the factors that cause increasing and decreasing returns to scale?

The returns to scale are increasing when the increase in output is more than proportional to the increase in inputs. They are decreasing if the increase in output is less than proportional to the increase in inputs.

What is the difference between economies of scale and returns to scale?

The difference between economies of scale and returns to scale is that economies of scale show the effect of an increased output level on unit costs, while the return to scale focus only on the relation between input and output quantities.

### What is the law of variable proportion?

Law of Variable Proportion is regarded as an important theory in Economics. It is referred to as the law which states that when the quantity of one factor of production is increased, while keeping all other factors constant, it will result in the decline of the marginal product of that factor.

What is the relationship between returns to scale and economies of scale?

## What is the meaning of law of Return?

The relationship between the inputs and the output in the process of production is clearly explained by the Laws of Returns or the Law of Variable Proportions. This law examines the production function with only one factor variable, keeping the quantities of other factors constant.

Returns to scale refers to the rate by which output changes if all inputs are changed by the same factor. Constant returns to scale: a k-fold change in all inputs leads to a k-fold change in output.

### What is law of variable proportions explain?

What is meant by returns to scale explain its various phases?

There are three kinds of returns to scale: constant returns to scale (CRS), increasing returns to scale (IRS), and decreasing returns to scale (DRS). A constant returns to scale is when an increase in input results in a proportional increase in output.

## What are the assumptions of law of returns to scale?

Laws of Returns to Scale are based on the following assumptions. All the factors of production (such as land, labour and capital) are variable but organization is fixed. There is no change in technology. There is perfect competition in the market.

What is the difference between economics of scale and returns to scale?

Economies of scale refers to the feature of many production processes in which the per-unit cost of producing a product falls as the scale of production rises. Increasing returns to scale refers to the feature of many production processes in which productivity per unit of labor rises as the scale of production rises.

### What do you mean by law of variable return?

This relationship is also called returns to a variable factor. The law states that keeping other factors constant, when you increase the variable factor, then the total product initially increases at an increases rate, then increases at a diminishing rate, and eventually starts declining.

Who gave the law of returns to scale?

Cobb-Douglas linear homogenous production function is a good example of this kind. This is shown in diagram 10. In figure 10, we see that increase in factors of production i.e. labour and capital are equal to the proportion of output increase. Therefore, the result is constant returns to scale.

## What are the 3 stages of law of return to scale?

Three phases of returns to scale There are three phases of returns in the long-run which may be separately described as (1) the law of increasing returns (2) the law of constant returns and (3) the law of decreasing returns.

What are the three stages of law of variable proportion?

Law of Variable Proportions – in terms of TPP Therefore, it has three clear stages: I – TPP increasing at an increasing rate. II – TPP increasing at a diminishing rate. III – TPP declining.