The concept of quasi-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 instance, 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 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".
