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Short run stages of the law of variable proportions

Stages

Terms used

TP

AP

MP

Stage 1

Increasing returns

to the factor

 

Starts from origin,

increases at an

increasing rate and then increases at a

diminishing rate

Starts from the origin and then increases till its maximum point

Increases, reaches a maximum and then starts falling

Stage 2

Diminishing returns

to the factor

Increases at a diminishing rate till it reaches the maximum point

Falls continuously

Falls continuously

till it is equal to zero

 

Stage 3

Negative returns

to the factor

Falls

Falls continuously

It is negative





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