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Meaning of Quasi-Rent The concept of quasi-rent was first introduced by Marshall. Quasi-rent, according to him, is the surplus earned by instruments of production other than land. The term 'rent' is applied to income from land and other free gifts of nature but quasi-rent to the income derived from appliances and machines which are the product of human effort. Quasi-rent stands for whole of the income which some agents of production yield when demand for them has suddenly increased.
Published by Gazu Lakhotia 72 months ago in Economics & The Economy | +0 votes | 0 comments
Relation between rent and price modern view Modern View: When Rent Enters Price Modern economists highlight certain situations in which rent is added into price. When we are pointing out not the total land of the nation but of the land accessible for certain works, rent is Included as a factor of price. This is obvious from the theory of the opportunity cost.
Published by Gazu Lakhotia 72 months ago in Economics & The Economy | +1 votes | 0 comments
Rent vs. Prices (Relation between rent and prices) Ricardian view It would seem that the rent, which a tenant is paying to the landlord, must enter into the calculations of the farmer when he disposes of his produce. But if the Ricardian theory of rent is properly grasped, it will be clear that rent canÂ’t go through into price. It doesnÂ’t form a component of cost of production.
Published by Gazu Lakhotia 72 months ago in Economics & The Economy | +0 votes | 0 comments
Theories of Interest Different theories have been put forward regarding interest. These theories can be grouped under two headings: (i) There are theories which explain why interest is paid; and (ii) Theories which explain how the rate of interest is determined.
Published by Gazu Lakhotia 72 months ago in Economics & The Economy | +0 votes | 0 comments
Supply of Loanable Funds As per Loanable Funds Theory, also called the Neo-classical Theory, interest is the value compensated for the exploit of loanable funds. Like the Classical and Keynesian theories of interest, it is also a demand and supply theory. It claims that rate of interest is calculated by the balance between supply and demand of loanable funds in the marketplace.
Published by Gazu Lakhotia 72 months ago in Economics & The Economy | +0 votes | 0 comments
Criticism of the classical Theory of Interest Classical Theory of Interest came in for serious criticism, especially at the hands of Keynes. The main grounds on which it is criticized are given as under:— (i) It is pointed out that classical theory of interest is based upon the assumption of full employment of resources. In other words, it assumes that an increase in the production of one thing must mean the withdrawal of some resources from the production of other things.
Published by Gazu Lakhotia 72 months ago in Economics & The Economy | +2 votes | 0 comments
Gross interest Vs. Net Interest The term "interest", as it is used in Economics, means a return on capital only. It does not refer to the total amount which a debtor may be paying to the creditor. But it refers only to that part of the payment which is for the use of capital only. The total amount which a creditor charges from a debtor by way of interest is really gross interest. It is composed of several other payments besides pure or net interest.
Published by Gazu Lakhotia 73 months ago in Economics & The Economy | +0 votes | 0 comments
Demand for Loanable Funds The demand for loanable funds comes mainly from four fields: a) Business or Firms Investment, (b) Consumers or Households, (c) Hoarding, arid (d) Government,
Published by Gazu Lakhotia 73 months ago in Economics & The Economy | +1 votes | 1 comments
KeynesÂ’ Liquidity Preference Theory of Interest Liquidity preference implies the demand for money to hold or the longing of the public to hold cash. In the words of Prof. Meyer, "Liquidity preference is the preference to have an equal amount of cash rather than of claims against others." Factors Governing Liquidity Preference
Published by Gazu Lakhotia 73 months ago in Economics & The Economy | +0 votes | 0 comments
Criticism of KeynesÂ’ Liquidity Theory of interest KeynesÂ’ Theory too has come under considerable criticism: Firstly, it has been pointed out that rate of interest is not purely monetary phenomenon. Real forces like productivity of capital and thriftiness also play an important role in the determination of the rate of interest. (ii) Keynes makes the rate of interest independent of the demand for investment funds.
Published by Gazu Lakhotia 73 months ago in Economics & The Economy | +0 votes | 0 comments
Factor determining rate of interest All the theories of interest say that the rate of interest is determined by the interaction of Demand and Supply. Then what is the difference between the various theories? The difference is really on the point: Demand for what and Supply of what? According to the Classical Theory, demand means the demand for savings for investment and the supply means supply of savings
Published by Gazu Lakhotia 73 months ago in Economics & The Economy | +0 votes | 0 comments
Concept of Zero Rate of interest Theoretically, a zero rate of interest can be conceived. We know that as time goes on, people's power to save and will to save tend to increase. The former because of the rising productive capacity and the latter because of the greater foresight and the tendency to discount the future at a low rate among the more advanced people.
Published by Gazu Lakhotia 73 months ago in Economics & The Economy | +0 votes | 0 comments
Difference between net profit and gross Profit What is Profit? Profit is the reward of the entrepreneur. It is the return on the fourth agent of production, viz., and enterprise. Actually, however, what people call profit is not wholly a reward for their entrepreneurial functions, i.e., they do not get the whole of it as entrepreneurs but they get a part of it in the capacity of a landlord, a capitalist or a manager. What people ordinarily call profit is really gross profit. In order to fi...
Published by Gazu Lakhotia 73 months ago in Economics & The Economy | +0 votes | 0 comments
Innovations Theory In the dynamic changes which give rise to profits according to the dynamic theory of profits. Joseph Schumpeter has singled out for special treatment the part played by innovations. The daring and the dynamic entrepreneurs continue to hit at one innovation or another, keeping their business ahead of others and thus make handsome profits. According to Schumpeter, the principal function of the entrepreneur is to make innovations and profits are a reward for performing this im...
Published by Gazu Lakhotia 73 months ago in Economics & The Economy | +0 votes | 0 comments
Theories of Profit There is a great deal of controversy among economists as to what profits are and what are not. Profits still represent a debatable ground. Several theories have been put forward about profits. According to some economists, profits are a reward for risk and uncertainty-bearing. Nature of profit
Published by Gazu Lakhotia 73 months ago in Economics & The Economy | +1 votes | 0 comments
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