(i) Labour is the animate factor of production.
(ii) It is an active factor of production
(iii) Labour implies several types
(iv) Labour is perishable
(v) Labour is inseparable from the labourer
(vi) Labour is less mobile between places and occupations.
(vii) Labour is a means as well as ends
(viii) Labour units are heterogeneous.
(ix) Supply of labour determines its reward
(x) Individual labour has weak bargaining power.

Introduction:
(i) Scale of production refers to the ratio of factors of production.
(ii) Every producer wants to reduce the cost of production.
(iii) When there is large scale production he enjoy lot of advantages.
(iv) These advantages are called economies of scale.
(v) Marshall divided them into internal economies and external economies.
Internal Economies:
They refer to advantages enjoyed by a firm.
Technical Economies:
When there is large scale production, there is more capital, new technology, research and development.
Financial Economies:
Big firms can float shares in the market for capital expansion.
Managerial Economies:
(i) Specialisation of labour is followed.
(ii) There is delegation of work.
Labour Economies:
(i) There is division of labour.
(ii) Quality and productivity increases.
Marketing Economies:
(i) Producers can buy raw materials at cheaper cost.
(ii) Transport cost is less.
(iii) They enjoy bargaining power.
Economies of survival:
(i) Product diversification is possible.
(ii) This reduces the risk in production.
(iii) Even if the market for one product falls, the market for other commodities offsets it.
External Economies:
(i) They refer to changes in any factor outside the firm causing an improvement in the production process.
(ii) These advantages are enjoyed by all the firms in the industry due to the structural growth.
Example:
1. Increased transport facilities.
2. Banking facilities.
3. Development of townships.
4. Development of information and communication.

Introduction:
In the long run there is no difference between fixed factor and variable factor.
Meaning:
The laws of returns to scale explain the relationship between output and the scale of inputs in the long run when all the inputs are increased in the same proportion.
Assumptions:
1. All the factors of production are variable except organisation.
2. There is no change in technology.
3. There is perfect competition.
4. Output is measured in physical quantities.
Increasing returns to scale:
If all inputs are increased by 1 %, output increases by more than 1 %.
Constant returns to scale:
lf all inputs are increased by 1%, output increases exactly by 1 %.
Diminishing returns to scale:
If all inputs are increased by 1 %, output increases by less than 1 %.
Explanation:
a) The movement from point a to b shows increasing returns to scale. When 2 units labour and capital are used the output has increased from IQ₁ to IQ₃.
b) The movement from b to c shows constant returns. When 4 units of labour and capital are used (i.e. double) the output also has doubled from IQ₃ to IQ₆.
c) The movement from c to d shows decreasing returns. The doubling of the factors from 4 units to 8 units has produced less increase in output i.e. from IQ₆ to only IQ₈
Stages input Output returns to Scale a to b 100% ↑ 200% ↑ increasing b to c 100% ↑ 100% ↑ Constant c to d 100% ↑ 33.33% ↑ decreasing

Iso and quant are derived from the Greek language, meaning 'equal' and 'quantity'.
Definition:
Isoquant curve is a locus of points representing various combinations of two inputs capital and labour yielding the same output. It is also called equal product curve or product indifference curve.
Properties:
1. The isoquant curve has negative slope:
(i) Capital is being substituted by labour.
(ii) Isoquant has negative slope because of diminishing MRTS.
(iii) Constant MRTS (straight line) and increasing MRTS (concave) are also possible.
(iv) It depends on the nature of isoquant curve

2. Isoquant curve is convex to origin:
The capital substituted per unit of labour goes on decreasing so the isoquant is convex to the origin.

3. Isoquant curves cannot intersect each other:
Point A lies on IQ₁ and IQ₂, Point C lies on IQ₂, showing higher output Point B
lies on IQ₁, showing lower output. C = A, B = A But C > B.


4. Upper isoquant curve represents a higher level of output:
Higher IQ₂ shows higher output 200 units. Lower IQ₁ shows lower output 100 units. IQ₂ means the use of more sectors than IQ₁. Arrow shows increase in output with a right and upward shift of an isoquant curve.

5. Isoquant curve does not touch either x axis or y axis:
In IQ₂ only capital is used and in IQ₁ only labour is used.

Conclusion:
These are the properties of isoquant curves.

Introduction:
The law states that if all other factors are fixed and one input is varied in the short run, the total output will increase at an increasing rate at first, then be constant and finally increase at a declining rate.
Definition:
"As equal increments of one input are added, the inputs of other productive services being held constant, beyond a certain point, the resulting increments of product will decrease (i.e) the MP will diminish". - G. Stigler
Assumptions:
1. Only one factor is variable.
2. All units of the variable factor are homogeneous.
3. The product is measured in physical units.
4. No change in technology.
5. No change in price of the product.

Units of variable factor	Total Product (TPL)	Marginal Product (MPL)	Average Product (APL)	Stages
1 2 3	2 6 12	2 4 6	2 3 4	I
4 5	16 18	4 2	4 3.6	II
6 7	18 16	0 -2	3 2.28	III

x-axis represents labourers. y-axis represents TP_L, MP_L, AP_L

Stages	Total Product (TP)	Marginal Product (MP)	Average Product(AP)
Stage I	It increases at an increasing rate. Then it increases at a decreasing rate. This is the point of inflection.	It increases, reaches maximum and starts to decrease.	It increases, reaches maximum.
Stage II	It continues to increase at a diminishing rate and reaches maximum	lt continues to diminish and becomes zero.	It is equal to MP then begins to diminish.
Stage III	It diminishes.	It becomes negative	It diminishes but always is positive.

Conclusion:
The law of variable proportion helps the producer to decide on the amount of factors to be employed.