David Ricardo(2)

David Ricardo Udayan Roy http://myweb.liu.edu/~uroy/eco54/ DAVID RICARDO

David Ricardo (1772-1823) ,[object Object],[object Object],[object Object],[object Object],[object Object],DAVID RICARDO

David Ricardo (1772-1823) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],DAVID RICARDO

Functional Distribution of Income ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],DAVID RICARDO

Production Technology DAVID RICARDO Table 1: Increases in output of corn (in plots of land of decreasing quality ->) No. of workers (each with one shovel) A B C D E F 1 100 90 80 70 60 50 2 90 80 70 60 50 40 3 80 70 60 50 40 30 4 70 60 50 40 30 20 5 60 50 40 30 20 10 6 50 40 30 20 10 0

Diminishing Returns ,[object Object],DAVID RICARDO

Wages ,[object Object],[object Object],[object Object],[object Object],DAVID RICARDO

Rents ,[object Object],DAVID RICARDO

Case 1: One Worker ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],DAVID RICARDO Note that Ricardo has precisely determined the level of output and its distribution. Table 1: Increases in output workers A B C 1 100 90 80 2 90 80 70 3 80 70 60

Zero-Rent Land ,[object Object],[object Object],[object Object],DAVID RICARDO

Profits ,[object Object],[object Object],[object Object],[object Object],DAVID RICARDO

Income distribution ,[object Object],[object Object],[object Object],DAVID RICARDO

Extensive Margin Rent ,[object Object],[object Object],[object Object],[object Object],DAVID RICARDO

Case 2: Three Workers ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],DAVID RICARDO Table 1: Increases in output workers A B C 1 100 90 80 2 90 80 70 3 80 70 60

Case 2: Three Workers ,[object Object],[object Object],[object Object],[object Object],DAVID RICARDO

Intensive Margin Rent ,[object Object],[object Object],[object Object],DAVID RICARDO

Case 3: Six Workers ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],DAVID RICARDO Table 1: Increases in output workers A B C 1 100 90 80 2 90 80 70 3 80 70 60

Summary of all 3 cases DAVID RICARDO Table 2 1 worker 3 workers 6 workers Output, total 100 280 520 Output, per worker 100 93.33 86.67 Rent, total 10 (10%) 40 (14.3%) 100 (19.23%) Rent, extensive margin 10 30 60 Rent, intensive margin 0 10 40 Wages, total 25 (25%) 75 (26%) 150 (28.85%) Wages, per worker 25 25 25 Profit, total 65 (65%) 165 (58.9%) 270 (52%) Profit, per shovel 65 55 45 Note: Amounts as a percentage of total output are in parenthesis.

Functional Distribution of Income ,[object Object],DAVID RICARDO

Falling Rate of Profit ,[object Object],[object Object],[object Object],[object Object],DAVID RICARDO

Steady State ,[object Object],[object Object],[object Object],[object Object],[object Object],DAVID RICARDO

Main Issue in Economics ,[object Object],[object Object],[object Object],DAVID RICARDO

Main Issue in Economics ,[object Object],[object Object],DAVID RICARDO

Theory of Value ,[object Object],[object Object],DAVID RICARDO

Labor Theory of Value ,[object Object],[object Object],DAVID RICARDO

Labor Theory of Value ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],DAVID RICARDO

Labor Theory of Value ,[object Object],[object Object],[object Object],DAVID RICARDO

Labor Theory of Value ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],DAVID RICARDO

Labor Theory of Value ,[object Object],DAVID RICARDO

Trade: Law of Comparative Advantage ,[object Object],[object Object],[object Object],[object Object],DAVID RICARDO

Comparative Advantage DAVID RICARDO ,[object Object],[object Object],[object Object],Hours needed to make 1 unit of … Opportunity Cost of producing 1 unit of … Food Clothes Food Clothes Alex 1 2 1/2 2 Betty 10 10 1 1

Comparative Advantage ,[object Object],DAVID RICARDO

Public Finance: Ricardian Equivalence ,[object Object],[object Object],DAVID RICARDO

Tax-Financed Government Spending ,[object Object],[object Object],[object Object],DAVID RICARDO

Debt-Financed Government Spending ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],DAVID RICARDO

Ricardian Equivalence ,[object Object],[object Object],DAVID RICARDO

Deductive Analysis ,[object Object],[object Object],[object Object],DAVID RICARDO

David Ricardo(2)

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