What Is the Law of Variable Proportions?

Also known as the law of diminishing returns and the law of proportionality, the law of variable proportions is described in three stages.

1. During the first stage of increasing returns, total production increases due to the efficiency of the unchanged factors in combination with the variable factor. At the most productive point, production begins leveling out.
2. In the second stage of diminishing returns, total production continues to increase but at a much slower rate, but the output is still positive.
3. During the third stage of negative returns, the total production declines steadily as variable factor costs exceed the fixed factor costs.

This law operates under several assumptions. It assumes that technology remains unchanged and that all non-increasing variables are held constant. It also assumes that a single input can be changed without affecting other inputs.