Question

8. In Principles of Political Economy an and Taxation, Ricardo states that the price of corn “…is not high because a rent is paid, but a rent is paid because [the price of] corn is high; and it has been justly observed, that no reduction would take price in the price of corn, although landlords should forego the whole of their rent.” In other words, Ricardo is saying that even if farmers paid no rent to landlords, the price of corn would not change. Explain how Ricardo reached this conclusion. Use a graph if it helps you to explain your answer.

9. The Physiocrats recommended that taxes be imposed on net product. This meant that landlords would pay taxes, not farmers. Do you think Ricardo would agree with the Physiocrats? Why or why not? Explain your answer.

Answer 1

This is my answer

Ricardo, in his day, tried to explain with the help of this argument that landlords were not to blame for dear corn. “Corn is high not because rent is paid but rent is paid because corn is high.” Rather, even if the landlords sacrificed all their rent (or if it were taken away by a cent per cent tax), corn would still sell at the same price as before. “It has been justly observed”, Ricardo continues, “that no reduction would take place in the price of corn although landlords should forego the whole of their rent”. It means that rent is not a factor that determines price but is itself determined by price.

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