Economic Rent

Economic rent is technical terminology used by economists to define one aspect of the price of goods and services. Generally, it designates the difference between the raw costs of everything needed to produce the goods or service and the price. In the analysis, economic rent is determined for each of the factors of production that are used to produce the good or service. Usually economic rent is due to some exclusivity. For example, for labor, it could be due to celebrity or skill (e.g. higher pay for skilled workers, in a region where there is a scarcity of such skilled workers); for a good, it may be due to the power of a patent; for real estate, it may be due to a favorable location. By contrast, if there is no exclusivity and there is perfect competition, there are no economic rents, as competition drives prices down to their floor. A recipient of economic rent is a rentier.

Economic rent is different from other unearned and passive income, including contract rent. This distinction has important implications for public revenue and tax policy. As long as there is sufficient accounting profit, governments can collect a portion of economic rent for the purpose of public finance with minimal adverse effect on production or consumption. For example, economic rent can be collected by a government as royalties or extraction fees in the case of resources such as minerals and oil and gas.

Read more about Economic RentDefinitions, Classical Factor Rent, Neoclassical Paretian Rent, Monopoly Rent, Land Rent, Hypothetical Example, Terminology Relating To Rent

Other articles related to "economic rent, rent, economics, rents":

Progressive Tax - Arguments - For Implementation
... The higher one's income, the greater the fraction of it that tends to consist of economic rent rather than rewards for any commensurate contribution to production ... By definition, economic rent is a factor payment exceeding that required to place a factor in its most productive use, so it can be taxed away entirely without impairing wealth production ... Consequently, in the absence of taxes specifically levied on economic rent, a steeply progressive tax on the highest incomes can be expected to fall almost ...
Economic Rent - Terminology Relating To Rent
... Gross rent Gross rent refers to the rent paid for the services of land and the capital invested on it ... It consists of economic rent, interest on capital invested for improvement of land and reward for risk taken by the landlord in investing his capital ... Scarcity rent Scarcity rent refers to the price paid for the use of the homogeneous land when its supply is limited in relation to demand ...
Economic Humanitarianism (Raëlianism) - Economic Rent
... See also Economic rent and Georgism One way to aid such an effort, Raelians believe, is by changing how property is exploited ... Messages involves of long-duration rent, an idea held by many proponents of Georgism ... a business, it is theirs for their entire life, and they can rent it out, but never for more than forty-nine years ...
Quasi-rent
... Quasi-rent is an analytical term in economics, for the income earned, in excess of post-investment opportunity cost, by a sunk cost investment ... Marshall (1842-1924) was the first to observe quasi-rents ... In general, an economic rent is the difference between the income from a factor of production in a particular use, and either the cost of bringing the factor into ...

Famous quotes containing the words rent and/or economic:

    Underneath the inharmonious and trivial particulars, is a musical perfection, the Ideal journeying always with us, the heaven without rent or seam.
    Ralph Waldo Emerson (1803–1882)

    A society which is clamoring for choice, which is filled with many articulate groups, each urging its own brand of salvation, its own variety of economic philosophy, will give each new generation no peace until all have chosen or gone under, unable to bear the conditions of choice. The stress is in our civilization.
    Margaret Mead (1901–1978)