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Explain the concept "Rent does not enter into price".

Here, we understand the relation between rent and price as explained by Professor Ricardo in detailed.

Explain the concept "Rent does not enter into price".
This Concept has been explained by Professor Ricardo. According to him, rent does not enter into price. The market price of the agricultural produce is determined by and is equal to the cost of production of the marginal land.
According to him, if the society wants that the marginal land must be brought under cultivation to meet the increasing demand for agricultural produce, it must be prepared to pay a price equal to its cost of production. If the price is not adequate enough to cover its cost of production of the marginal land, nobody will be prepared to cultivate the land. It clearly indicates a fall in the supply of agricultural produce which will result in arise in price sufficient to cover the cost of production of the marginal land. Means, the price of the agricultural produce is equal to the cost of production of the marginal land, as marginal land yield no surplus and does not pay any rent, that is said that rent does not enter into price. It is the cost of production of the marginal land which determine the price in the market and because this cost of production does not include any element of rent, therefore it is said that the rent does not enter into price. Rent is thus not a part of price. Rent is price determined and not price-determining.
Professor Ricardo given example of Corn and said, 'Corn is high not because rent is high, but rent is high because corn is high.' This means that higher prices of agricultural produce are not because of higher rents. Rent is not a part of price, in fact it does not enter into price.
According to him, Rent does not affect price. It is the price which affects rents. As the market price of the agricultural produce increases, because of an increase in population, the area of cultivation is extended and the sub-marginal land which upto this time was lying uncultivated is brought under cultivation. The result is that the differential surplus, which is rent, increases in case of super marginal land while the marginal land which not paying any rent upto this time begins to pay rent. Thus, with a rise in price the rents of the super marginal land increase and the marginal land begins to pay rent, sub-marginal land now becomes marginal land.
It is therefore said that high price of agricultural produce is not the result of high rent, is the rather the cause of high rent. In short, price is high not because rent is high, but rent is high because price is high. It clearly indicates, Rent does not enter into price, it is price-determined and not price-determining.
Rent does not enter into price
Marginal Land
Rent
Price
Cost of Production
Price-determined
Not price-determining.
Ricardian theory of Rent - Modern Theory of Rent - Rent does not enter into price.
Kinnari
Tech writer at NewsandStory
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