Compare and contrast Marshallian theory with the Ricardian theory of rent.

 Marshallian theory and Ricardian theory of rent. 

Explanation: 

Marshall's quasi-rent theory is the extension of the Ricardian rent principle to the short-term earnings of capital equipment (such as machinery, construction, etc.) in the short-term inelastic supply. 

In the theory of Ricardo, it is held that land rent occurs because of variations in fertility or condition of the different land plots. 

The distinctive feature of land is the fact that its supply is completely inelastic to price changes and therefore its earnings are largely dependent on the demand for it. n the short term, however, fixed capital equipment such as machinery is also perfectly inelastic in supply, and the expense of its manufacture is negligible once it is made. 

The Ricardian theory of rent is based on the following assumptions:

1. Rent of land arises due to the differences in the fertility or situation of the different plots of land. It arises owing to the original and indestructible powers of the soil. 

2. Ricardo assumes the operation of the law of diminishing marginal returns in the case of cultivation of land. As the different plots of lanad differ in fertility, the produce from the inferior plots of land diminishes though the total cost of production in each plot of land is the same. 

3. Ricardo looks at the supply of land from the standpoint of the society as a whole. 

4. In the Ricardian theory it is assumed that land, being a gift of nature, has no supply price and no cost of production. So rent is not 

a part of cost, and being so it does not and cannot enter into cost and price. This means that from society’s point of view the entire return from land is a surplus earning. 

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