1. Topic : Rent

2. RENT
 Economic Rent. Rent as Surplus
 Contract Rent.
RENT
Differential Rent Scarcity Rent
Quasi Rent

3. Differential Rent
 By Ricardo : “Rent is that portion of the produce of
the earth which is paid to the landlords for the use
of original and indestructible powers of the soil.”
 By Example :
Grades of Yields in Price in Total
land Quintal per Quintal ($) Returns ($)
Acre
A 50 50 2500
B 35 60 2100
C 20 70 1400
D 15 80 1200

4. Differential Rent
Graph :
For A ,
50-15 =35
For B ,
35-15=20
For C ,
20-15=5
For D ,
15-15=0

5. Differential Rent
Critical Appraisal : -
1.”Original and indestructible Powers”
2.Use of term Fertility.
3.No-rent land.
4.Best lands cultivated First.

6. Scarcity Rent
 Ricardo's theory explains why one land commands
higher rent than another. But it fails to answer how
rent arises. The modern economist has evolved a
theory called the Scarcity Rent.
 According to it, rent arises due to the relative scarcity
of land in relation to its demand. The greater the
demand for land the higher shall be its rent. Thus Rent
is the resultant of the interaction of the forces of
demand and supply in relation to land. The modern
theory of rent is also called on the demand and supply
theory.

7. Scarcity Rent
Demand Side Supply Side
 The demand for land is derived  The supply of land is fixed.
from the demand of the Thus increased rent cannot
products of land. increase supply. Nor fall in
 If the demand for products price of land can decrease its
increases, there will be a supply.
corresponding increase in the
demand for the use of land.  Supply of land is negligible. It
 The demand curve for a factor
represents a case of perfectly
slopes downward from the left inelastic supply- The rent may
lo the right.(Law of Marginal rise or fall but the supply of
Productivity). land remains the same.
 The downward sloping  Rent is determined at the point
demand curve expresses that where demand for and supply
more land will be demanded at land intersect each other.
lower rent.

8. Quasi-Rent
 The concept of Quasi-Rent was given by Marshall.
 It is the surplus earned by the instruments of
production other than land.
 It stands for the whole of the income which some
agents of production yield when demand for them
suddenly increased.
 It is earned when Supply cannot be increased in
response to an increase in the demand for them
, hence this is a Short Term concept.

9. Quasi-Rent
Graph :
SS is the absolute inelastic supply.
SS cuts DD the demand curve at E.
So OP is the price when supply is OS
for a normal demand.
But when the demand increases to
DD’ in a short run price changes to
OP’ being supply constant at OS .
So the change from OP to OP’ is the
quasi rent.
In the long run the supply is totally
elastic represented by PL so supply
changing to OM price keeps to be
OP so thus no change in price and
no quasi rent .

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