Page 336 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Unit-21: Macro Theories of Ricardo, Marx and Kailki

Recognition of Theory Notes

(i) Perfect employment condition is available in economic system.
(ii) In total income, total wages and total profit are mixed.
(iii) The marginal consumption nature or saving nature is constant for labour group and owner group.
(iv) The nature of saving is less found in labour class rather than owner group.
(v) Additions of saving of labour and saving of owner are called Total Savings.

The returns of first group is called ‘wages’ and second group is called ‘profit.’ In wages,
salary and bonus are counted and in profit, interest and revenue are counted.

Algebraic Explanation of Theory

Suppose that total national income is A, total wages income is B and total profit income is indicated as
C, then we can say,
A = B + C ...(i)

That means, national income is called the addition of total wages and total profit. The conception of
Perfect Employment is that investment which is always equal to savings. In algebra—

I = S ...(ii)
Total savings of society will be the total addition of total wages and total profit. If savings from income
of wages SB and savings SC are done due to profit income then
S = SB + SC ...(iii)
SB is used for average mentality to savings of wages and SC is the savings of getting profit earlier
established in investment.

SB = SB × B
SC = SC × C
From equation (ii) and (iii), we get the following—

I = SC × C + SB × B
From (i) we have

B = A – C
Therefore

I = SC × C + SB (A – C)
I = SC × C + SB × A – SB × C
I = ( SC – SB) C + SB × A
Dividing both sides by A
1 __
C __
= (SC – SB) + SB
A
A
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