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Home Rent Definition and Meaning of Rent

Definition and Meaning of Rent:

 

The term 'rent' is an unfortunate one. Its meanings in Economics differ from the ordinary usage. In the every day speech, the term, rent is applied to the periodic payments made regularly for the hire of a particular asset.

 

For example, the payments made by a tenant to the owner of a house, or factory or land on weekly, monthly, or yearly basis is a rent in the popular sense.

 

In Economics:

 

"The concept of rent or to be more precise 'economic rent' is used in a special sense. According to the classical economists, rent is a price of land. It is a payment made by a tenant farmer to the landlord for the use of original and Indestructible powers of the soil".

 

Modern Concept of Rent:

 

The modem economists do not use the concept of economic rent in the restricted some. They apply rent to all the factors of production which do not have a perfect elastic supply. According to them:

 

"Economic rent is a surplus or excess over the transfer earnings".

 

In the words of Building:

 

"Economic rent may be defined an any payment to a unit of production which Is in excess of the minimum amount necessary to keep that factor In its present occupation".

 

Example:

 

For example, a typist is ready to work for $4600 per month in a college but he is paid $4900 per month. This is because of the fact that the market demand for the typists is greater than its supply. So long as the supply cannot be adjusted to demand the typist will continue earning a payment in excess of $4600 of the amount which is necessary to keep him in that occupation. This monthly surplus money of $300 (4900 - 4600 = $300) is an economic rent.

Relevant Articles:

Definition and Meaning of Rent
Ricardian Theory of Rent/Ricardian Model of Rent
Modern Theory of Rent
Rent and Price Theory
Concept of Quasi Rent
Economic Progress and Rent
 

Principles and Theories of Micro Economics
Definition and Explanation of Economics
Theory of Consumer Behavior
Indifference Curve Analysis of Consumer's Equilibrium
Theory of Demand
Theory of Supply
Elasticity of Demand
Elasticity of Supply
Equilibrium of Demand and Supply
Economic Resources
Scale of Production
Laws of Returns
Production Function
Cost Analysis
Various Revenue Concepts
Price and output Determination Under Perfect Competition
Price and Output Determination Under Monopoly
Price and Output Determination Under Monopolistic/Imperfect Competition
Theory of Factor Pricing OR Theory of Distribution
Rent
Wages
Interest
Profits
Principles and Theories of Macro Economics
National Income and Its Measurement
Principles of Public Finance
Public Revenue and Taxation
National Debt and Income Determination
Fiscal Policy
Determinants of the Level of National Income and Employment
Determination of National Income
Theories of Employment
Theory of International Trade
Balance of Payments
Commercial Policy
Development and Planning Economics
Introduction to Development Economics
Features of Developing Countries
Economic Development and Economic Growth
Theories of Under Development
Theories of Economic Growth
Agriculture and Economic Development
Monetary Economics and Public Finance
History of Money

 

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