Tiêu đề Ricardo Theory of Rent SS.pdf ✅

N O T E S B Y S H A S H I K R S H A W A S S I S T A N T P R O F E S S O R E C O N O M I C B B C O L L E G E A S A N S O L Ricardo Theory of Rent Notes prepared by Shashi Kr Shaw
Introduction  David Ricardo, a classical economist developed a theory in 1817 to explain the origin and nature of economic rent.  In the Napoleonic wars (1805-1815) there were large rise in corn and land prices.  Ricardo in this regard raise a particular question and analyze it.  The question was, “Did the high price of corn determining the rise in land prices or did the increase in land prices determining the high price of corn” Notes prepared by Shashi Kr Shaw
Introduction  Ricardo Concluded that, Corn Prices is high not because rent is high but rent is high because corn price is high.  According to Ricardo, rent is the payment made to landlord for the use of land. Ricardo was of the view that rent is paid for the fertility of land.  Ricardo define rent as “Rent is the portion of the produce of the earth which is paid to landlord for the use of the original and indestructible powers of the soil ” Notes prepared by Shashi Kr Shaw
Assumptions 1. Rent of land arises due to the differences in the fertility of the soil. 2. Law of diminishing marginal returns. As the different plots of land differ in fertility, the produce from the inferior plots of land diminishes though the total cost of production in each plot of land is the same. 3. Rent accrues only to land i.e. none of the other factors of production earn rent. However later on Modern economists disagreed on it. 4. There is tendency to move from most fertile land to the less fertile one. 5. Land on which no rent is earned is known as marginal land. 6. Total cost spent on each piece of land is same Notes prepared by Shashi Kr Shaw