Page 337 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Microeconomic Theory

Notes Now, if we divide both sides by (SC – SB) then the equation is
1
SB
1 __ _______
+

A SC – SB = C __ _______
.

A
SC – SB
Since, C is the symbol of profit and A is the symbol of national income. So, we can say that
SB
1
C __
1 __
–

= _______ × A _______

SC – SB
A
SC – SB
Since the price of SC is fixed in the equation, so the ratio of national income (C/A) depends upon the
profit of rational income 1/A. So as the rate of investment increases, the profit portion in national
income would increase and the wages would be low.
Self Assessment
Fill in the blanks:
1. In economic system, perfect employment condition is .............................. .
2. In total income, total wages and total ............................... are mixed.
3. The addition of savings of wages and profit is called .............................. .
That condition in which conclusion is not get true:
(i) Real wages should be the rate of a fixed life standard wages.
(ii) There should be a settlement between incomplete competition and traders.
(iii) The capital product should be affected by the rate of profit.
(iv) Total profit does not below minimum rate.
Criticism of Theory
(i) Kolder's total revenue distribution theory is based on unreal assumption.
(ii) It is wrong to fix the perfect employment and level of production.
(iii) Appropriation is not free from average savings and the nature of savings.

The total profit of society will be the addition of wages and profits.

21.2 Revenue Distribution’s New Prominent Theory
After Ricardo, many economists have explained distribution of income. These economists have accepted
marginal production as the mail base of distribution. New prominent economists do not establish any
solid theory of distribution. Every prominent thought is established only by production equation of
Cobb and Douglass. From the production equation of Cobb and Douglass, it is clear that how the
portion of labour is unstable since 100 years.
J. E. Meed of Cambridge University has accepted the following assumptions by re-establishing this
theory:
(i) The rule of constant result is followed in production.
(ii) Free and limited economical system.
(iii) The result of every factor is equal to its marginal production.

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