CHAPTER Xin 

 THE PROPORTIONS OF THE FACTORS OF PRODUCTION 



The law of variable proportions. In the production of a given 

 crop, like corn, all the factors of production, land, labor, and 

 equipment, are brought into play ; but there is no definite pro- 

 portion in which they must of nee essity be combined in order 

 to bring the corn crop into existence. The quantity of corn 

 produced on a given area of land will be gieatly influenced, 

 however, by the amount of labor and equipment associated 

 with the land. 



The law of increasing and diminisling returns operates when 

 increasing amounts of labor and equipment are associated with 

 or applied to a given area of land. A small amount of labor and 

 equipment per acre may yield 20 bushels of corn to the acre, 

 double the amount may produce 45 bushels per acre, whereas 

 three times the amount may produce only 58 bushels per acre. 

 In the first instance the law operates to give increasing re- 

 turns, in the second, diminishing returns. 



At any given time and place there is a certain proportion 

 in which the factors combine most profitably. If less or more 

 than a certain amount of labor and equipment be associated 

 with a given area, the profits will be less than they should be. 

 The proportion which is right for one farm at a given time may 

 be wrong for another. This may be due to differences in the 

 physical and biological character of the land or to differences 

 in location with respect to the market. Also it is true that 

 the adjustment of proportions which yield maximum profits 

 on a given farm at one time may be wrong at another time on 

 the same farm. This will result when there is a change in the 

 rel? tive cost* of the factors of production. 



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