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.
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Explain how the prices of goods and services used in the CPI differ from the prices reflected by GDP deflator
Suppose that when the price of hamburgers decreases, the Ruiz family increases their purchases of ketchup. To the Ruiz family
A) hamburgers and ketchup are complements. B) hamburgers and ketchup and substitutes. C) hamburgers and ketchup are normal goods. D) hamburgers are normal goods and ketchup is an inferior good.