According to neoclassical theory of distribution if the firms are competitive and subject to constant returns to scale total income in the economy is distributed between labor and capital used in production according to their marginal productivities. Distribution theory in economics the systematic attempt to account for the sharing of the national income among the owners of the factors of production land labour and capital traditionally economists have studied how the costs of these factors and the size of their return rent wages and profits are fixed. The reason for these initial warning is that the neoclassical theory of distribution what has become known as the marginal productivity theory of distribution has been a subject of much debate and confusion since it was formulated in the 1890s we shall survey this debate here. The object of this book is to present a complete systematic and thorough exposition of the neoclassical theory of production and distribution despite this basic objective each chapter presents extensions of neoclassical theory and interpretations of established relations the book has two distinct parts
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