Q.Explain the concept of scarcity of rent.

Quasi-rent is the short-period surplus earned by man-made appliances (machines, buildings) whose supply is temporarily fixed; it disappears in the long run.

Explanation

Quasi-rent is a concept given by Alfred Marshall. True economic rent is earned by land because its supply is fixed by nature. Man-made factors like machines, instruments and buildings also have a fixed supply in the short period, so they too earn a surplus income similar to rent during that period. Marshall called this surplus quasi-rent (meaning "almost rent" or rent-like). It is only temporary because, unlike land, the supply of these man-made factors can be increased in the long run; as supply rises, the surplus is competed away and quasi-rent disappears. Thus quasi- …

Contract rent is the actual amount a tenant agrees to pay the owner for the use of land or property under a contract. It covers the use of the land plus the buildings, improvements and capital on it, and therefore differs from pure economic rent, which is the payment for the use of land alone.

Meaning

In economics the term rent is used in two senses: economic rent and contract rent. Contract rent is rent in the popular, everyday sense.

Contract rent is the payment actually made by a tenant to the landlord for the use of land, a house or other property, according to an agreement or contract entered into between the two parties for a certain period and at an agreed amount.

Explanation

Contract rent is fixed by mutual agreement and may be influenced by the bargaining power of the two parties, the duration of the contract and the prevailing conditions. Importantly, it is a payment not only for the original and indestructible powers of the soil (pure land), but also for the buildings, fences, wells and other improvements made on the land and the capital invested in it.

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Quasi-rent, a concept of Alfred Marshall, is the short-period surplus earned by man-made appliances like machines and buildings whose supply is fixed for the time being. It is 'rent-like' only in the short run; in the long run, when supply can be adjusted, quasi-rent disappears.

Meaning

Marshall pointed out that rent is earned by land because its supply is fixed. In the short run, however, the supply of certain man-made factors of production — such as machines, instruments, buildings and equipment — is also fixed, because they cannot be produced quickly. Therefore, like land, they too can earn a surplus income in the short period. Marshall called this surplus quasi-rent, that is, rent-like earnings.

Explanation

Quasi-rent is the excess of total revenue earned by such a fixed factor over its total variable cost in the short run. Because the supply of these appliances is temporarily fixed, an increase in demand for their product raises their earnings above what is needed to keep them in use, and this surplus is quasi-rent.

The difference between true rent and quasi-rent is that:

• the supply of land is permanently fixed, so land rent is permanent; while …

Contract rent is the rent actually paid by a tenant to a landlord under an agreement (contract) for the use of land or property over a stated period. It is the market payment settled between the two parties and may be more or less than the pure economic rent of the land.

Meaning

Contract rent is the amount of rent that a tenant agrees to pay to the owner (landlord) for the use of land, a building or other property, as fixed by a contract between them for a given period.

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Contract rent is the rent fixed by an agreement (contract) between the landlord and the tenant and actually paid for the use of land or property for a stated period; it may be more or less than economic rent.

Meaning

Contract rent is the payment actually made by a tenant to the landlord according to a contract or agreement between them for the use of land, a building or other property for a specified period.

It is the rent in the ordinary, everyday sense. It is distinguished from economic rent, which (in Ricardo's theory) is the payment for the use of the original and indestructible powers of the soil, or the surplus a factor earns over its transfer earnings. Contract rent includes not only this economic rent but also payment for other things provided by the landlord, such as buildings and improvements, and is settled by bargaining between the two parties.

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