Please Share the below Post
Rate this post

Meaning and Definition:

The concept of quasi-rent (Marshallian Rent) owes its origin to Dr. Alfred Marshall. Dr. Marshal is of the opinion that:

“It is not possible for human beings to increase the supply of land. It is fixed by nature. If price of a produce rises, the surface of earth cannot be increased and if price falls, it cannot be decreased. But by appliance of machine which are the product of human efforts, the supply can be increased or decreased if a fairly long period of time is allowed”.

“Marshall is of the view that a differential surplus which arises from a factor of production, whose supply is fixed for all times to come should be named as rent but a temporary gain which a factor or production earns due to temporary limitation of its supply should be called quasi-rent“.

Example:

For example, the demand for shaving blades suddenly goes up in Canada and the price of a packet containing 10 blades rises from $15 to $20. The entrepreneurs lured by high profits will naturally try to produce more blades. They may try to meet the demand by working the factory for 24 hours.

Let us suppose, the supply is still short of demand and the price remains at $20 per packet. The new entrepreneurs attracted by high profits will establish new factories. A factory cannot be established in a day. It needs time for installing new machinery. When new plants are set up, the supply of blades will increase and the price comes down to the level of their costs of production ($15). The temporary gain which the old factories have earned during the period when new factories were not installed, is regarded as quasi-rent.

Quasi rent is, thus, a temporary gain which is earned by a factor of production due to the temporary limitation of its supply“.

Modern view of Quasi Rent:

The modern economists do not place land under a separate category. They are of the opinion that when all the factors of production are scarce in a relation to their demand, the rent can arise from all of them. Rent is one of the important members of a large family consisting of wages, interest and profits, or, in the words of Marshall, we can say:

“Rent is the leading species of a large genus”.

How does rent of land differ from the rent of; (a) Fisheries, (b) Mines and (c) Buildings?

(a) Difference between rent of land and fisheries. If proper care of fisheries is taken and fishing is not done in the breeding season, then the rent of land and fisheries is very similar to each other. A fishery which is well located near the market will be in an advantageous position. Its produce will be marketed at a lesser cost than the other fisheries which are situated at some distance from the market. If the price of fish per kilo in the market is equal to the cost of operating it in the distant fisheries, then the fisheries which are situated near the market will earn a surplus. This differential gain or rent is all due to the factor of situation.

If a fishery is more productive in the supply of fish than the other fisheries, then it will enjoy rent in the same way as a superior land enjoys over an inferior land. If fishing is done throughout the year, then the resources of the fisheries will be soon exhausted and the rent will be analogous to mines.

(b) Difference between rent of land and mines. Rent of mines stands on a different footing from rent of land. There is no doubt that mines are a part of free gift of nature but they do not posses the quality of being indestructible. As mines are worked out, they soon get exhausted. It is not possible to gain its content by managing it as we do in the case of agricultural land. So the owner of the mines demands of reward, firstly, for the differential gain enjoyed by the mines over other mines and secondly, the compensation for the exhaustion of mine. This compensation is called “royalty”. Thus, we find that the rent of land differs from mines as the owners of mines get rent proper as well as royalty.

(c) Difference between rent of land and urban site land. Rent of land and rent of urban site do not differ fundamentally from each other. In the case of agricultural land, the fertility of the soil plays a very important part in the determination of rent. As regards urban site rent, it is situational advantage which plays the decisive role.

For example, if two houses quite similar to each other are situated at two different places, one in the heart of the city and the other in the suburb, the former will enjoy more rent than the later.