3. DETERMINATION OF LAND RENT Changes in the demand for land... S Inelastic Supply... combines with demand... Land Rent (dollars) D1 0 Acres of Land
4. DETERMINATION OF LAND RENT Changes in the demand for land... S Inelastic Supply... combines with demand... to determine rent R1 Land Rent (dollars) D1 0 Acres of Land
5. DETERMINATION OF LAND RENT Changes in the demand for land... S If demand decreases... rent decreases. R1 Land Rent (dollars) R2 D1 D2 0 Acres of Land
6. DETERMINATION OF LAND RENT Changes in the demand for land... S If demand decreases... rent decreases. ...and decreases R1 Land Rent (dollars) R2 D1 R3 D2 D3 0 Acres of Land
7. DETERMINATION OF LAND RENT Changes in the demand for land... S If demand decreases... rent decreases. ...and decreases ...and decreases ...and decreases R1 Land Rent (dollars) R2 D1 R3 D2 D3 0 D4 Acres of Land
8. DETERMINATION OF LAND RENT Changes in the demand for land... If demand is so low that there is no rent determined, land is said to be a free good, commanding no rent. S R1 Land Rent (dollars) R2 D1 R3 D2 D3 0 D4 Acres of Land
9. INTEREST The Price Paid for the Use of Money Stated as a Percentage Money NOT a Resource Supply of Loanable Funds Demand for Loanable Funds Rate Determination...
10. LOANABLE FUNDS THEORY OF INTEREST S i = 8% Interest Rate, (percent) D F0 Quantity of Loanable Funds
11. EXTENDING THE MODEL Financial Institutions Changes in Supply Changes in Demand Other Participants
12. KEY TERMS economic rent incentive function single-tax movement loanable funds theory of interest pure rate of interest nominal interest rate real interest rate usury laws explicit costs implicit costs economic or pure profit normal profit static economy insurable risks uninsurable risks Copyright McGraw-Hill/Irwin, 2005 END BACK
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