Ricardian theory of rent JKSSB, FAA

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The Ricardian theory of rent is an economic theory proposed by David Ricardo in the early 19th century. According to Ricardo, rent is the return to the ownership of land and is determined by the difference in the productivity of land.

The theory states that land has different fertility levels and that the most fertile land is used first for agriculture. As the population grows and demand for food increases, less fertile land is brought into cultivation. The rent for this less fertile land is higher because it is less productive than the most fertile land.

The theory suggests that the value of land is determined by its fertility and location. The most fertile land will command the highest rent, while less fertile land will command a lower rent. Additionally, land located in an area of high demand will command a higher rent than land located in an area of low demand.

The theory also states that as the population grows, the demand for food will increase, which will drive up the price of land and the amount of rent that landowners can charge. This can result in a situation where the cost of food becomes unaffordable for a significant portion of the population.

MCQs:

  1. What is the main point of Ricardian theory of rent? a) Rent is the return to the ownership of land b) Rent is determined by the difference in the productivity of land c) Land has different fertility levels d) All of the above

  2. What determines the value of land according to Ricardian theory? a) Fertility and Location b) Demand and Supply c) Labor and Capital d) Market trends

  3. How does population growth affect the rent according to Ricardian theory? a) Decreases the rent b) Increases the rent c) No effect on the rent d) Depends on the fertility of land

  4. What is the impact of high demand for food on rent according to Ricardian theory? a) Decreases the rent b) Increases the rent c) No effect on the rent d) Depends on the fertility of land

Answers:

  1. d
  2. a
  3. b
  4. b

It's worth to mention that the Ricardian theory of rent have been criticized by many economist for the difficulty to measure productivity of land and not considering the externalities and the role of technology improvement in the farming process, among others.

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