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Economic Rent Definition

When it comes to economic rent definition, it should not be confused with normal profit or producer surplus. Economic rent is independent of cost opportunity, unlike with economic profit in which the cost is an important component. Continue reading for more useful info provided by our economics homework experts.

economic rent definition

Short History of Economic Rent

In economics, economics rent pertains to any payment to a factor of production in excess of the cost that is needed to bring that certain factor to production. When it comes to classical economics, it means that it is any payment made, which includes imputed value or any benefit received for non-produced inputs like the location. In neoclassical economics, it includes income that is gained by beneficiaries like unofficial corruption and labour guilds.

General Information about Economic Rent

Economic rent should be perceived as unearned value in which economic profit is a narrow term that describes surplus income that is greater than the risk-adjusted alternative. In fact, it can be eliminated by competition because all value from locations and natural resources yields economic rent.

Keep in mind that economic rent is not a rent. People think of rent as periodic payment for real estate use, but the term economy rental is being used in defining the fundamental aspect of an economy. It is the revenue that can be earned from land and other natural resources for which fixed supply exists.

To put economy rental in its proper context, it is the production of any services or products dependent on three major production factors such as capital, labour, and land.

economy rental definition

Explanation on the Rent Concept

The term rent is vast and its meaning in economics is different from ordinary usage. In ordinary speech, the term rent is applied to periodic payment that is made regularly in hiring a particular asset. In economics, the rent concept is being used in a special sense. As said by classical economists, the rent is the price of the land and it is the payment made by rent farmer to the property owner for the use of indestructible and original powers of the soil. This means that the term rent applies, whenever a certain person has a plan to rent a land.

economic rent graph

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