Question

What was Ricardo's explanation for why higher prices cause higher land rent

Answer 1

As per ricardo's explaination rent means that portion of the produce of the earth which is paid to the landlord for the use of the original and indestructible powers of the soil.as per his theory rent is producer's surplus or differential gain.

As per ricardo's view land had only one use to grow corn.and its supply is fixed.hence price of land is decided based upon the demand of land .price of a factor of production in perfectly inelastic supply is economic rent.

We can say that high price of corn caused an increase in demand for land and rise in its price.

Ricardo assume that land has only one use.and land does not have transfer earnings.market price of any good is determined by costs of the marginal producer and for this marginal producer,rents are zero,ricardo concluded that economic rent is not a determinant of market price,rather price of good is determind solely by the market demand for good and the availability of fertile land.

Hence as per ricardo's view higher price cause higher land rent.