Concepts In Rent, Profit And Distribution
WELCOME TO YOU
I heartily welcome you to read few concepts related to "Distribution", "Rent", interest, etc. Distribution is one of the main key activity in Economics.
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Contract rent
Contract rent is the higher charge of rent for using a durable good. It doesn't include which we pay monthly such as the Electricity bill because electricity is not durable. Example,
- Room rent (example from our daily life)
- Rent for using any of the durable assets or material like vehicles.
It is a periodic rent (monthly) for using any material or good. It may be annually (per year) or even for short period less than a day. for example, rent charged for cycling for few hours. It always based on the agreements.
Economic rent
It is also called as Pure rent. It refers to the payment for using productivity of the land (Natural resources) as a reward. It is the pure rent after deducting or subtracting the elements like interest, profit, wages, depreciation from gross rent or contract rent.
According to David Ricardo "It is surplus over cost or expenses of cultivation".
Modern rent theories
There are 3 modern rent theories in Economics. It includes:
- Quasi-rent: Short-term or short period rent (Marshallian rent)
- Scarcity rent: Rent to factor which supply is in scare or perfectly inelastic.
- Transfer earning: Joan Robinson, Income earned by alternative factors (opportunity cost).
Quasi-Rent
Scarcity rent
Transfer earnings
Wages
- Physical work: works like weightlifting, driving which involves physical effort.
- Mental work: like Teacher, adviser, etc which requires mental efforts/experience and knowledge to perform the task.
Types of wages
- Time wages: the wages are paid according to the time.
- Peace wages: the wages are paid according to work done by a labourer.
- Money wages: wages are paid in the form of money are called as money wages.
- Real wages: the purchasing power of money wages are called as real wages.
Gross interest
Net interest
- Government bonds
- government loans.
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