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Home Laws of Returns Law of Constant Returns


Law of Constant Returns/Law of Constant Cost:


(Version of Classical and Neo Classical Economists):


Definition and Explanation:


The law of constant returns also called law of constant cost. It is said to operate when with the addition of successive units of one factor to fixed amount of other factors, there arises a proportionate increase in total output. The yield of equal return on the successive doses of inputs may occur for a very short period in the process of production. The law of constant return may prevail in those industries which represent a combination of manufacturing as well as extractive industries.


On the side of manufacturing industries, every increased investment of labor and capital may result in a more than proportionate increase in the total output. While on the other extractive side, an increase in investment may cause, in general, a less than proportionate increase in the amount of produce raised. If the tendency of the marginal return to increase is just balanced by the tendency of the marginal return to diminish yielding an equal return, we have the operation of the law of constant returns. In the words of Marshall:


"If the actions of the law of increasing and diminishing returns are balanced, we have the law of constant return".


In actual life, the law of constant returns can operate only if the following conditions are fulfilled:


(i) There should not be any increase in the prices of raw materials in the industry. This can only be possible if commodities are available in large supply.


(ii) The prices of various factors of production should remain the same. The .supply of various factors of production needed for a particular industry should be perfectly elastic.   


(iii) The productive services should not be fixed and indivisible.


If we study the above mentioned conditions carefully, we will easily conclude that in the actual world, it is not possible to find an industry which obeys the law of constant returns. The law of constant returns can operate for a very short period when the marginal return moves towards the optimum point and begins to decline. If the marginal return, at the optimum level remains the same with the increased application of inputs for a short while, then we have the operation of law of constant returns. The law is represented now in the form of a table and a curve.




Productive doses

          Total Return (meters of cloth)

          Marginal Return          (meters of cloth)

















In the table given above, the marginal return remains the same, i.e. 60 meters of cloth with the increased investment of inputs.





In figure (11.4) along OX are measured the productive resources and along OY is represented the marginal return. CR is the fine representing the law of constant returns. It is parallel to the base axis.

Relevant Articles:

Production Function
Law of Variable Proportions

Law of Diminishing Returns

Law of Increasing Returns
Law of Constant Returns
Law of Costs
Law of Returns to Scale

Principles and Theories of Micro Economics
Definition and Explanation of Economics
Theory of Consumer Behavior
Indifference Curve Analysis of Consumer's Equilibrium
Theory of Demand
Theory of Supply
Elasticity of Demand
Elasticity of Supply
Equilibrium of Demand and Supply
Economic Resources
Scale of Production
Laws of Returns
Production Function
Cost Analysis
Various Revenue Concepts
Price and output Determination Under Perfect Competition
Price and Output Determination Under Monopoly
Price and Output Determination Under Monopolistic/Imperfect Competition
Theory of Factor Pricing OR Theory of Distribution
Principles and Theories of Macro Economics
National Income and Its Measurement
Principles of Public Finance
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National Debt and Income Determination
Fiscal Policy
Determinants of the Level of National Income and Employment
Determination of National Income
Theories of Employment
Theory of International Trade
Balance of Payments
Commercial Policy
Development and Planning Economics
Introduction to Development Economics
Features of Developing Countries
Economic Development and Economic Growth
Theories of Under Development
Theories of Economic Growth
Agriculture and Economic Development
Monetary Economics and Public Finance

History of Money

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