Rent Classical view Rent is the payment made

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Rent Classical view “Rent is the payment made for the use of land only”

Rent Classical view “Rent is the payment made for the use of land only” Modern view “Rent is the difference between Actual Earning and Transfer Earning”

Definition • Rent is the payment made for the use of land only. Theories

Definition • Rent is the payment made for the use of land only. Theories of Rent • Classical theory of Rent or Ricardian theory of Rent • Modern theory of Rent

Classical theory or Ricardian theory of Rent • According the Ricardo, “Rent is that

Classical theory or Ricardian theory of Rent • According the Ricardo, “Rent is that portion of produce of the earth which is paid to landlord for use of indestructible power of the soil” In other words, Rent is depend upon fertility of soil and use of land only.

Some of the important Assumptions • • • Rent is on the use of

Some of the important Assumptions • • • Rent is on the use of land only. Rent is based on the fertility of soil. Perfect competition in the market. Law of diminishing Returns will be applicable. Increase in production depend upon increase in the demand of commodities or with the increase of population.

Explanation of theory • Extensive Cultivation • Intensive Cultivation Extensive Cultivation- When for increase

Explanation of theory • Extensive Cultivation • Intensive Cultivation Extensive Cultivation- When for increase in production, land will increase, while other factors remains constant Intensive Cultivation- When for increase in production, other factors will increase, while supply of land will remain same

1. Table of Extensive Cultivation of land Grades of Land Labour and Capital Productivity

1. Table of Extensive Cultivation of land Grades of Land Labour and Capital Productivity (Qt. ) Rent A 100 10 10 -4=6 B 100 8 8 -4=4 C 100 6 6 -4=2 D 100 4 4 -4=0

1. Rent in Extensive Cultivation 12 10 8 6 4 2 0 Grade A

1. Rent in Extensive Cultivation 12 10 8 6 4 2 0 Grade A Grade B Grade C Grade D

2. Table of Intensive Cultivation Doses of labour and Capital Land Productivity (Qt. )

2. Table of Intensive Cultivation Doses of labour and Capital Land Productivity (Qt. ) Rent Dose-1 2 hect. 10 10 -4=6 Dose-2 2 hect. 8 8 -4=4 Dose-3 2 hect. 6 6 -4=2 Dose-4 2 hect. 4 4 -4=0

2. Rent in Intensive Cultivation 12 10 8 6 4 2 0 Dose 1

2. Rent in Intensive Cultivation 12 10 8 6 4 2 0 Dose 1 Dose 2 Dose 3 Dose 4

Table 1 and Diagram 1 shows that D grade land is no rent land

Table 1 and Diagram 1 shows that D grade land is no rent land grade A, B, C land will have rent 6, 4, 2 respectively. Table 2 and Diagram 2 shows that D dose is the most inferior dose thus no rent dose.

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