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Differences between law of variable portions and returns to scale

Basis of difference

Law of variable proportions

Law of returns to scale

Time period

Applies in the short run

Applies in the long run

Variable and fixed


Only variable factors are changed

and units of fixed factors

remain the same

All factors are increased

simultaneously. No distinction

between fixed and variable factors


There are 3 stages

  • ƒ Increasing returns
  • ƒ Diminishing returns
  • ƒ Negative returns

There are 3 stages

  • ƒ Increasing returns
  • ƒ Constant returns
  • ƒ Decreasing returns

Optimum stage

Stage 2 is considered to be the

optimum stage of production

There is no stage which is the

best in the long run

Normally, a firm is interested to know what combination of factors of production or inputs would be minimize its cost of production. This will be understood with the help of Iso-Quants and Iso-Cost lines.

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