David Ricardo

Question 1

David Ricardo contributions

Answer 1

• Deductive Analysis
• Ricardo’s Theory of Rent : diminishing returns in agriculture
• Ricardo’s Labor Theory of Value
• Theory of Income distribution: Profits, Wages, Rents
• Falling Rate of Profits
• International Trade (Comparative Advantage)

Question 2

Deductive Analysis

Answer 2

Began with basic premises and then used logic to deduce generalizations; an approach to studying economics which is based on analyzing abstract models

Question 3

Ricardo’s theory of rents

Answer 3

land differs in quality and is limited in quantity.

Question 4

Ricardo’s Labor theory of value

Answer 4

-Focus on Exchange Value
-For a commodity to have exchange value, it must have use value
-Utility is necessary for exchange value but does not determine it
-Possessing utility or use value, commodities derive their exchange value from (1) scarcity and (2) Quantity of labor required to produce them
However wages do not affect the exchange value only the amount of labor used does

Question 5

Ricardo’s theory of comparative costs

Answer 5

Comparative advantage - an entity has a comparative advantage in producing a good if their opportunity cost in the production of that good is low
Absolute advantage - the ability to produce a good using fewer inputs than another producer