David Ricardo Case Study

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Assignment of Economics of Growth and Development
Topic:- Ricardo

Submitted to:- Submitted by:-
Prof. M.R. Khurana Name: - Jyoti
Department of Economics Class: - M.A. 2ndyr. Roll No. : - 42
About David Ricardo
David Ricardo (1772–1823) was one of the greatest theoretical economists of all time. Ricardo attended school in London and Amsterdam and at the age of fourteen entered his father's business. Initially Ricardo following his dad’s business line, set up independently as a broker on the London Stock Exchange. But soon Ricardo became interested in economics
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Both consider the rate of population growth to be geared to changes in demand, which in turn, are geared to the rate of capital accumulation. Both relate the rate of population growth to the position of money wages relative to subsistence wages. In contrast to Adam Smith Ricardo considers the size of the subsistence wage to be a variable rather than a constant. Population growth can be stimulated by the introduction of agricultural innovations and by the importation of foodstuffs from abroad. Or it can be slowed down by policy induced subjective changes in minimal standards of …show more content…
Given the rate of profit then it is apparent from the (1) that capital grows with economy’s net income and given net income and capital accumulation is an increasing function of the difference between actual profits and minimal compensation of risk. Ricardo theory of profits has been subject to much discussion. His use of terms “profits” and “wages” referred to the relative share of profits and to the relative share of wages at the margin. Since at margin no rent paid. Profits (in Ricardian sense) depend only upon the wages. With this definition profits can be determined as a residual over and above wage on that portion of land which yield no rent. However, it is not the actual wage that determines profit in the Ricardian sense, rather it is subsistence wage. In discussion concerning of the impact upon capital accumulation. Ricardo preferred to consider the portion of wages that is over and above subsistence as part of profits rather than as part of wages. Provided that capital and labor move in constant proportion each other (which Ricardo assumed for the long run) the rate of profit would rise and fall according to whether the subsistence wage rate fall or rose. In mathematical notation- r = m

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