Question

Which of the following laws explains the short-run production function?

• A. Law of demand
• B. Law of variable proportion
• C. Law of returns to scale
• D. Elasticity of demand

Hint:

Short-run production = Law of Variable Proportions. Long-run production = Law of Returns to Scale.

Answer 1

The Correct Option is B

Production functions are analyzed in two time frames:

Short-run: A period where at least one factor of production is fixed (e.g., capital, land) and others are variable (e.g., labor). The relationship between inputs and output in the short-run is explained by the Law of Variable Proportions (or Law of Diminishing Returns).
Long-run: A period where all factors of production are variable. The relationship is explained by the Law of Returns to Scale.
Law of demand and elasticity are related to consumption, not production.