Definition of Rent
In ordinary sense the term rent refers to the hiring charges paid to the owner of an asset for using his right of ownership for a specific period of time. In economics the term rent is called economic rent. It is defined as “That part of the payment by the tenant, who is made only for the use of land i.e. free gift of nature”. In economics rent is mainly related to agriculture and is mainly distinguished as economic and contact rent.
Economic Rent and Contact Rent
Some times the agriculturist tenant makes the payment which ...view middle of the document...
The amount which factor can earn in its next best paid alternative use called transfer earning. In this sense if the factor is earning above its transfer earnings, the surplus or excess earnings is called economic rent.
The concept of Quasi rent was first introduced by Marshal according to him, quasi rent is a surplus earned by investments of production other then land. It is the income derived from appliances and machines, which are the product of human effort. Quasi rent stands for whole of the income, which some agents of production yield when demand for them is suddenly increased. It is earned during a period that their supply cannot be increased in response to increase in demand for them. Hence it is a short period concept. It has also been defined as the excess of total revenue earned in the short run over and above the total variable costs. QUASI RENT = TOTAL REVENUE – TOTAL VERIABLE COST The concept of quasi rent can be understood with the help of an example. At the time of independence of Pakistan, the demand for houses increased due to sudden increase in population but the supply could not be increased due to the scarcity of building material. The abnormal increase in the return on capital invested in capital (building) is quasi rent.