The marginal theory of distribution makes an assertion that the price of any factor depends upon its marginal?
Answer Details
The marginal theory of distribution makes an assertion that the price of any factor depends upon its marginal productivity. This means that the price that a factor of production receives, such as wages for labor or rent for land, is determined by the additional output it produces.
For example, if a worker can produce 10 units of output per hour, and the market price for each unit is $10, then the marginal productivity of the worker is $100 per hour. In a competitive market, the worker's wage would tend to be equal to their marginal productivity, so they would be paid approximately $100 per hour.
This theory is based on the idea that the value of a factor of production is determined by the value of the output it produces. If a factor is highly productive and produces a lot of output, it will be in high demand and its price will be higher. On the other hand, if a factor is less productive and produces less output, it will be in lower demand and its price will be lower.
Therefore, the marginal theory of distribution asserts that the price of any factor of production depends on its marginal productivity, or the additional output it produces.