Feedback
What do you think about us?
Your name
Your email
Message
Economic rent is a key concept in economics, representing the surplus payment to a factor of production beyond what's needed for its current use. It arises from unique qualities or limited supply of resources, such as land or skills. The text explores its origins, differences from profit, rent-seeking behaviors, and its role in corporate finance and strategy. Various types of economic rent, including differential, scarcity, and monopoly rent, are discussed, along with their implications in different sectors.
Show More
Economic rent is the additional payment made to a factor of production above what is necessary to maintain it in its current use
Economic rent arises when a resource has a fixed supply and its quantity cannot be increased regardless of the price
The theory of economic rent was first introduced by David Ricardo in the 19th century
Differential rent is the result of differences in the inherent qualities of a resource
Scarcity rent is the surplus obtained from limited supply of a resource
Monopoly rent occurs when a single provider has control over a market, allowing them to set prices above competitive levels
Economic rent is a surplus payment to a factor of production, while profit is the residual income after all costs have been paid
Understanding the difference between economic rent and profit is crucial for understanding income distribution and incentives for investment and production
Rent-seeking is the process of attempting to obtain economic rent through manipulation or exploitation of the economic environment
00
Factors of production associated with economic rent
Land, labor, capital; economic rent applies when payment exceeds the minimum to retain its use.
01
Supply elasticity's role in economic rent
Economic rent occurs with perfectly inelastic supply; quantity remains fixed regardless of price.
02
Example of economic rent in real estate
High-value city land yields more income than its maintenance requires, due to location desirability.
