What Is Law Of Return?

Law of return refers to the relationship between the addition in the turn over and the successive increase in the doses of one of the factors of production while that of the other factors remain constant. It is generally observed that the application of successive doses of a variable factor to other factors of production which remain constant, bring a proportionate, more than proportionate or less than proportionate increase in the turn over. If the increase is proportionate, the tendency is called the law of constant return. In case the increase is more than proportionate, it is called the law of increasing return, whereas if the return is less than proportionate it is called the law of diminishing return. In other words, laws of returns refer to the three faces of tendency that develops in the turnover where the doses of one factor vary while that of others remains constant.

Law of increasing return refers to a tendency that develops in production process when an increase in the variable factor brings more than proportionate return. This happens in early stages. As the successive addition in the doses of the variable factor id made, the exploitation of the productivity of the constant factors take place and ultimately the optimum point is remained at which the proportionate return is maximized.

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