Definition of Economic rent:
Economic rents should not be confused with normal profits or surpluses that arise in the course of competitive capitalist production. This term also differs from the traditional use of the word "rent," which applies to payments received in exchange for temporary use of a particular good or property, such as land or housing.
Economic rent is an amount of money earned that exceeds that which is economically or socially necessary. This can occur, for example, when a buyer working to attain a good or service that is considered exclusive makes an offer prior to hearing what a seller considers an acceptable price. Market imperfections thus lead to the rise of economic rents; it would not exist if markets were perfect since competitive pressures would drive down prices.
Difference between what a factor of production (capital, land, labor) is earning, and what it could earn in the next best-paid employment.
The extra amount earned by a resource (e.g., land, capital, or labor) by virtue of its present use.
How to use Economic rent in a sentence?
- The rent of a condo is $1000 marked by the owner, but due to the scarcity of condos in that location a person offered $1200 for the same condo. Hence $200 is the economic rent of that condo.
- Taxing the economic rent of natural resources induces users to make optimal use of environmental resources.
- Me and my friend wondered what the economic rent would be and thought it might earn us more in the next round.
- The economic rent marginally compared the alternatives for us so we could understand all of our options in the market.
- Economic rents can appear in several contexts, including labor markets, real estate, and monopolies.
- Economic rents often arise from market inefficiencies or information asymmetries.
- Economic rent is an amount of money earned that exceeds that which is economically or socially necessary.
Meaning of Economic rent & Economic rent Definition