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Quasi Rent

The document discusses the concept of quasi-rent introduced by Marshall, which refers to the short-run earnings of capital equipment that are inelastic in supply. Unlike land, which has a perfectly inelastic supply, quasi-rent is temporary and depends on demand conditions, disappearing in the long run as supply becomes more elastic. The document also includes references for further reading on microeconomics.

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6 views4 pages

Quasi Rent

The document discusses the concept of quasi-rent introduced by Marshall, which refers to the short-run earnings of capital equipment that are inelastic in supply. Unlike land, which has a perfectly inelastic supply, quasi-rent is temporary and depends on demand conditions, disappearing in the long run as supply becomes more elastic. The document also includes references for further reading on microeconomics.

Uploaded by

yogyasingh6611stella
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Department of Legal Studies

BA/BBA LLB - I

Principles of Microeconomics
(25COT-110)

Unit-V

Quasi-rent
Introduction
 The concept of quasi rent was introduced in economic
theory by Marshall Marshall’s concept of quasi-rent is the
extension of the Ricardian concept of rent to the short run
earnings of the capital equipment (such as machinery,
building etc.) which are in inelastic supply in the short run.

 The distinguishing characteristic of land is the fact that its


supply is perfectly inelastic to changes in its price and
therefore its earnings depend mainly upon the demand for
it.

 In the short run, the fixed capital equipment such as


machinery is likewise perfectly inelastic in supply and cost
of its production is not relevant once it has been produced.
 During the short period, the earnings of specialized
capital equipment depend mainly upon the demand
conditions and are thus similar to land rent and have
therefore been called rent by Marhsall. Since the
capital equipment is not permanently in fixed supply
like land and instead their supply is very much elastic
in the long run. Marshall preferred to call their
earnings in the short period as Quasi rent rather than
rent.

 The quasi-rent is only temporary surplus which is


enjoyed by the owner of the capital equip- ment in the
short run due to the increase in demand for it and this
will disappear in the long run due to the increase in
References and Video Links

• Koutsoyiannis, A. (2003). 3-8, Chapter 1, Modern Microeconomics. Palgrave Macmillan.


• Dwivedi, D. N. (2007). 1.2-1.9, Chapter 1, Microeconomics: Theory and Applications. Vikas
Publications.
• Ahuja, H.L (2012). 309-381, Chapter-III, Modern Microeconomics, S. Chand and Company.

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