Rent us Surplus
In Economics. the tenn ‘rent’ is being increasingly used in the sense of a surplus i.e.. what a factor of production earns over and above what is essential to maintain its supplies in its present occupation. It can be easily understood.
But when the’ supply or a factor is not perfectly responsive to changes in the reward or the factor, It can continue to earn more than what is necessary to call forth its supplies without any fear or new units of factors coming in to deprive it of extra reward. TIle supply of land in general, though not for a particular use, is absolutely inelastic, and as such, its supply i. independent of what it earns. That is a higher rent cannot attract more or it and a lower rent cannot drive II out. That is why it is said that land has no supply pri That is, no payment is necessary to call forth its supply it is there already. Its supply price being zero. the whole of its earnings is rent in the economic sense. Economic rent is the surplus which remams to the supplier of a factor after he has paid all the e – penses of production and has remunerated himself for his own productive effort. We have said above that. from the social pint of view, the whole of the earnings of land (and of other free gifts of nature) can be termed as rent balanced has no supply price. or its co t of produ lion i zero, Why then is any payment made for the u r such factors of production? Thit simply due t fact that they arc scarce in relation to demand for them