Notes And Study Material for Exam Papers

The theory of economic rent was first propounded by the English classical economist David Ricardo. David Ricardo in his book “Principles of Political Economy and Taxation” defined rent as “That portion of produce of the earth which is paid to a land lord on account of the original and indestructible powers of the sil.” Ricardo in his theory of rent has emphasized the rent is reward for the services of the land which is fixed in supply. Secondly it arises due to original qualities of land which are indestructible. The original indestructible powers of the gil include nature soil fertility, mineral deposits, climatic conditions etc. Rent under extensive cultivation: According to Ricardo, all the units of land are not of the same grade. They differ in fertility and location. The application of the same amount of labour, capital and other cooperating resources give rise to difference in productivity. The difference in productivity or the surplus which arises on the superior unit of...

The modern economists like Pareto, Mrs. Joan Robinson, Boulding, Singer, and Shepherd have tried to simplify and generalize the Ricardian Theory of Rent. According to them the Ricardian theory of rent is too closely related to land. This creates an impression that rent is a peculiar earning a land only. The fact however is that other factors of production i.e. labour, capital and entrepreneurship may also be earning economic rent. The determination of economic rent, the modern economists say, can be explained in the same manner as the reward of other factors, which is by demand and supply factor. Demand and Supply Analysis A) Demand for a factor: The demand for a factor which may be land labour or capital is a derived demand. Land say for instance is demanded for its produce. The higher the produce, the greatest is the demand for land. A firm will pay rent equal to the marginal revenue productivity of land. The rent diminishes as more land is used due to the operation of law ...

In such a situation a humanist not merely relaxes and ignores the problem. He must call upon his studies, his philosophy, and his ancient friends, to guide him. He must grid up his soul to the vigor and tension necessary for meeting the ills of life head on. But precisely why? Montainge seems to sense that this is the weakest point in his argument. Although he says that lack of preparation costs us too much in panic and torment at death, his explanation of the frequent bravery of simple people is not convincing, and he seems to know it; for he offers it tentatively and never repeats it. He knows that common people, whole nations, even cowards, can often perform the bravest actions even without study. He does not insist on the strictest possible regime of preparation, as do those who seek our privation. He says that we may use the body to help us if the soul is not strong enough alone; that all honourable assistance against the ills of life is not only permissible but even laudabl...

Firms do not operate in a vacuum, they interact with their customers and with other firms. These interactions take place in markets and economics has developed models of markets that predict how firms will behave in certain situations. The three major markets are 1. Perfect competition, 2. Perfect monopoly, and 3. Monopolistic competition. Perfect competition is the most intense form of market interaction and though it may be intense, it is not as rare as many would have us believe. Perfect competition is characterized by the following: 1.         There are many firms selling a homogenous product. 2.         There are many buyers. 3.         There are no barriers to entering or exiting the industry. 4.         Firms in the industry have no advantage over new entrants. 5.       ...

In oligopolistic industry, there are only a few big firms which control the supply of a commodity and each firm produces a significant portion of the market. They are, therefore, mutually interdependent. In other words, we say the behaviour of the firm directly affects and is affected by the action of the rival firms. The firms under oligopoly are motivated by two opposing forces, one force moves them to co-operate with one another so that the profit of each firm are maximized. The other force takes the away from the joint profit maximizing price and profit. Under oligopoly the pricing theory is fundamentally the same with the difference that the larger the number of firms, the greater will be the differences in the marginal costs and more remote will be the possibility of collusion or agreement, whether taxeit or explicit. When they all deal in a standardized product and each is producing a considerable portion of total output, the price and output policy of each is likely to af...

Oligopoly is the market organization in which there are a few or small number of firms in an industry and they produce the major share of the market. The word ‘a few’ or small number is vague. The economists therefore refer to oligopoly as that market situation in which the number of firms is small but each firm in the industry takes into consideration the reaction of the rival firms in the formulation of price policy. The number of firms in the industry thus may be only two or more than two say 5, 10, 20. The basic condition for the existence of oligopoly is that a firm in the ‘group product’ formulate its price policies with an eye to their effects on its rivals.  There is thus a great deal of interdependence between or among the small number of firms. The oligopolistic industries are classified in a number of ways. If there are only two giant firms in an industry and they produce identical products. It is called perfect on pure duopoly. In case the goods produced by the tw...

Montainge’s early view of life was a rather Epicurean pessimism. “The wretchedness of our condition,” he was to write, “makes us have less to desire than to fear...That is why the sect of philosophy that set the greatest value on voluptuousness and raised it to its highest price still ranked it with mere freedom from pain. To have no ill is to have the happiest state of well being that man can hope for.” Though he said that he had thus far lived reasonably happily, except for the loss of his friend, this was a great exception. Moreover, his other bereavements were to contribute their share to his pessimism. Fifteen years later the mere expressions that reminded him of his grief could still revive it: “My poor master! Or, My great friend! Alas, my dear father! Or, My good daughter!” in his gloomy apprehension, he looked for security in preparation, like the healthy young men he had seen carrying pills around to take in case of a cold. As the surest way to the negative contentmen...