Essay on Marginal Productivity Theory! The marginal productivity theory of distribution, as developed by J. B. Clark, Wick-steed and others during the last quarter of the 19th century, seeks to provide a general explanation of how the price (or the earnings) of a factor of production is determined. In other words, it lays down the broad principles of the distribution [...]
The following points highlight the five major defects of the marginal productivity theory. 1. One of the major assumptions of the theory is that there exists perfect competition in both the factor (labour) market and the product market. This assumption is not realistic because, actually, in almost all the markets, perfect competition does not exist. First, in most of the [...]
In this article we will discuss about the marginal productivity theory that discusses the demand for a variable factor of production. Introduction Marginal Productivity Theory (MPT): The leading exponents of the marginal productivity theory (MPT) are the neoclassical economists J. B. Clark (1847-1938), P. H. Wicksteed (1844-1927) and J. G. Knut Wicksell (1851- 1926). This theory especially discusses the demand [...]