The table below shows the annual output obtained from four grades of land, A, B, C and D, each cultivated with the SAME cost of Rs. 8,000 per hectare (the same amount of labour and capital applied to each). Land D is the marginal (no-rent) land.
| Grade of Land | Output (quintals/hectare) | Cost of Cultivation (Rs.) |
|---|---|---|
| A | 50 | 8,000 |
| B | 40 | 8,000 |
| C | 30 | 8,000 |
| D (marginal, no-rent) | 20 | 8,000 |
Using Ricardo's theory of rent, find (a) the price of wheat per quintal, and (b) the rent per hectare earned by each of the grades A, B, and C.
Ricardo's theory fixes the price of the crop by the cost of production on the LAST (marginal, no-rent) land brought under cultivation, since this land earns exactly zero surplus:
Every grade of land superior to the margin produces MORE output for the identical cost of Rs. 8,000, and the value of this extra output, at the price of Rs. 400/quintal just found, is that grade's rent:
For Land A: .
For Land B: .
For Land C: .
For Land D (the marginal land itself): , so its rent is Nil, exactly as the definition of "no-rent land" requires.
As a check, note that Rent can equally be computed as Total Revenue minus Cost, since cost is identical (Rs. 8,000) across all four grades: Land A's total revenue is , so its surplus over cost is — exactly matching the rent computed above, confirming the answer.
Price = Rs. 400 per quintal. Rent: A = Rs. 12,000, B = Rs. 8,000, C = Rs. 4,000, D = Nil (marginal land, by definition).
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