Theory of Labor value of David Ricardo

David Ricardo’s labor theory of value, which he explained in On the Principles of Political Economy and Taxation, is that the comparative economic value of a good is what is created by the amount of labor, including the labor to produce raw materials and machinery, that goes into its production. More labor equals greater value, and varying amounts of labor will yield different market values of goods.
Key Features of Ricardo’s Theory
Labor as Source of Value:
Ricardo assumed that the underlying source of value was the quantity of labor required to create a good.
Relative Value:
He was especially concerned with determining the relative prices at which various goods traded in the market.
Includes Past and Present Labor
Theory includes not just the direct labor of the laborer but also the “labor embodied” in the tools, machinery, and raw materials employed in the production process.
Objective Measure of Value:
Ricardo was looking for an objective measure of value, which he discovered in the amount of labor, not subjective considerations such as usefulness or desirability.
How it Works
Equal Labor, Equal Price:
If two goods take an equal quantity of labor to make, they must, according to his idea, fetch an equal price from the market.
Unequal Labor, Unequal Price:
A good which takes more labor will be dearer than one which takes less labor