BASIC CONCEPT OF RENT

• BASIC CONCEPTS OF RENT
  MICRO ECONOMICS/BUSINESS ECONOMICS II
• MEANING OF RENT

1. IN SIMPLE WORDS RENT IS USED FOR THAT PAYMENT WHICH IS MADE REGULARLY FOR FIXED PERIOD FOR THE USE OF THE SERVICES OF THE GOODS.
2. ECONOMICS RENT MEANS RENT IS APPLIED ONLY FOR PAYMENT MADE FOR FACTORS OF PRODUCTION WHICH ARE IMPERFECTLY ELASTIC IN SUPPLY.
3. CLASSICAL ECONOMISTS RICARDO RENT IS THE PRICE PAID FOR THE USE OF ORIGINAL AND INDESTRUCTIBLE POWER OF THE SOIL.
4. CLASSICAL ECONOMISTS CONSIDERED RENT AS AN INCOME ARISING OUT OF THE SERVICES OF LAND.
5. SUPPLY OF LAND IS A FREE GIFT OF THE NATURE.
6. MODERN ECONOMISTS LIKE MRS JOAN ROBINSON,” ECONOMIC RENT IS A SURPLUS WHICH IS NOT SPECIFIC TO LAND ONLY. IT CAN BE PART OF THE INCOME OF LABOUR,CAPITAL AND ENTREPRENEUR.
7. ANY PAYMENT TO FACTOR OF PRODUCTION WHICH IS IN EXCESS OF ITS TOTAL SUPPLY PRICE. RENT= ACTUAL EARNING-TRANSFER EARNING

• DIFFERENCE BETWEEN CONTRACT AND ECONOMIC RENT

1. CONTRACT RENT IS THE PAYMENT WHICH IS MADE FOR THE USE OF LAND AND CAPITAL INVESTED THERON ON PREDETERMINED CONDITIONS.
2. THAT PART OF THE RENT THE CONTRACT RENT WHICH IS PAID FOR THE USE OF SERVICES OF LAND ALONE IS CALLED ECONOMIC RENT
3. PROF BOULDING ECONOMIC RENT AS ECONOMIC SURPLUS  AS LANDLORD GETTING WITH OUT ANY EFFORT
4. RICARDO AND CLASSICAL ECONOMISTS,” ECONOMIC RENT IS THE PRICE PAID FOR THE USE OF SERVICES OF LAND.

• TYPES OF RENT

1. ECONOMIC RENT : PAYMENT MADE FOR THE USE OF LAND ALONE IS CALLED ECONOMIC RENT.
2. THAT PART OF THE RENT THE CONTRACT RENT WHICH IS PAID FOR THE USE OF SERVICES OF LAND ALONE
3. PROF BOULDING ECONOMIC RENT AS ECONOMIC SURPLUS  AS LANDLORD GETTING WITH OUT ANY EFFORT
4. RICARDO AND CLASSICAL ECONOMISTS,” ECONOMIC RENT IS THE PRICE PAID FOR THE USE OF SERVICES OF LAND.

5. GROSS RENT:-GROSS RENT REFERS TO THAT RENT WHICH IS PAID FOR THE SERVICES OF LAND AND THE CAPITAL INVESTED ON IT. COMPONENTS OF GROSS RENT:-

1. ECONOMIC RENT: PAYMENT MADE FOR THE USE OF  LAND
2. INTEREST ON CAPITAL INVESTED FOR IMPROVEMENT
3. REWARD FOR RISK

6. SCARCITY RENT:-MALTHUS THE MAIN REASON FOR EMERGENCE OF RENT IS THE SCARCITY OF LAND. SCARCITY RENT IS THE PRICE PAID FOR THE USE OF THE HOMOGENEOUS LAND WHEN ITS SUPPLY IS LIMITED IN RELATION TO DEMAND.RICARDO WAS OF THE OPINION THAT LAND WAS USEFUL BUT IT WAS SCARCE, PRODUCTIVITY OF THE LAND WA INDICATIVE OF GENEROSITY BUT TOTAL SUPPLY LIMITED NIGGARDLINESS OF NATURE

7. DIFFERENTIAL RENT:-ACCORDING TO RENT ARISES BECAUSE OF DIFFERENCE IN THE FERTILITY OF LAND. IN EVERY COUNTRIES SOME LAND MORE FERTILE AND LESS FERTILE. SUCH DIFFERENTIAL RENT ARISES UNDER EXTENSIVE CULTIVATION. IN CASE OF INTENSIVE CULTIVATION MORE AND MORE UNITS OF LABOUR AND CAPITAL ARE APPLIED TO A GIVEN PIECE OF LAND THEIR MARGINAL PRODUCTIVITY WILL GO ON DIMINISHING BECAUSE OF THE OPERATION OF LAW OF DIMINISHING RETURN. THE LAST UNIT WILL BE CALLED THE MARGINAL UNIT AND EARLIER UNITS WILL BE CALLED INTRA MARGINAL UNITS. DIFFERENCE IN TH INTRA MARGINAL AND MARGINAL UNIT IS CALLED DIFFERENTIAL RENT.
8. SITUATION RENT:-RENT ALSO ARISES ON ACCOUNT OF DIFFERENCE IN SITUATIONS OF LAND, IT IS CALLED SITUATION RENT.