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Write a brief note on David Ricardo’s contributions to economic thought. - Leaving Cert Economics - Question e - 2009
Question e
Write a brief note on David Ricardo’s contributions to economic thought.
Worked Solution & Example Answer:Write a brief note on David Ricardo’s contributions to economic thought. - Leaving Cert Economics - Question e - 2009
Step 1
Law of Comparative Costs
Answer
David Ricardo is renowned for his development of the Law of Comparative Costs, which emphasizes that nations should specialize in the production of commodities in which they are most efficient. This specialization allows for greater overall efficiency in trade, enabling countries to trade for the rest of their required goods.
Step 2
Theory of Economic Rent
Answer
Ricardo's Theory of Economic Rent holds that as population increases, it becomes necessary to utilize less favorable land. As more inferior land is used, the cost of producing food increases, leading to higher prices. This shift creates a surplus in production on better land, thus raising rents payable for that premium land.
Step 3
Accepted the Subsistence Wages Theory
Answer
Ricardo accepted the Subsistence Wages Theory, proposing that any rise in wages above subsistence levels would trigger an increase in population. This increase would subsequently drive wages back down as more workers would enter the labor market, leading to cyclical shifts in wage levels.