What determines the economic rent for land? Explain from a supply and demand perspective

What will be an ideal response?


Economic rent is the price paid for the use of land (or natural resources) whose supply is basically fixed. The first characteristic, therefore, is that the supply curve for land or natural resources is perfectly inelastic or fixed. Land and natural resources also have no production costs and are a “free” gift of nature, so an increase in economic rents provides no incentive function to bring forth more land. The second characteristic is that demand is the only active determinant of economic rent. As demand rises and falls, then economic rents will rise and fall.

Economics

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If the Mexican nominal exchange rate does not change, but prices rise faster in Mexico than in all other countries, then the Mexican real exchange rate

a. does not change. b. rises. c. declines. d. There is not enough information to answer the question

Economics

When consumers' purchasing power decreases, the economy will experience a period of

A. contraction. B. expansion. C. containment. D. emergence.

Economics

If a positive permanent supply shock were to occur, the resulting equilibrium would be a:

A. higher level of output at lower prices. B. lower level of output and prices. C. higher level of output and prices. D. lower level of output at higher prices.

Economics

Suppose a firm is hiring resources l and m under purely competitive conditions to produce product Y, which sells for $2 in a purely competitive market. The prices of l and m are $10 and $4 respectively. In equilibrium the MPs of l and m, respectively,

are: A. 1 and 1. B. 2 and 5. C. 10 and 4. D. 5 and 2.

Economics