Laws of Production
The laws of production describe the technically possible ways of increasing the level of production. Output may increase in various ways.
Output can be increased by changing all factors of production. Clearly this is possible only in the long run. Thus the laws of returns to scale refer to the long-run analysis of production.
In the short run output may be increased by using more of the variable factor(s), while capital (and possibly other factors as well) are kept constant.
The marginal product of the variable factors) will decline eventually as more and more quantities of this factor are combined with the other constant factors. The expansion of output with one factor (at least) constant is described by the law of (eventually) diminishing returns of the variable factor, which is often referred to as the law of variable proportions.
Laws of Production in economics deals with the concepts of cost and producers equilibrium. It is an important aspect of economics as it helps a business determine the level of output that leads to maximum profits. It also defines the various variable and fixed costs of the firm.