ECONOMIC RENT is defined as A return over and above opportunity cost (or the normal rate of return) necessary to keep a resource in its current use ECONOMIC RENT is Any payment made to a resource above the amount necessary to induce any amount of the resource to be employed ECONOMIC RENT is The amount over and above the opportunity cost necessary to keep a resource in its current use in normal language, ECONOMIC RENT answers What is the most someone would be willing to pay for the right -to use a resource? -or to use part of a resource? Demand for land at varying prices assume that the quantity of a certain type of land available is 300,000 acres and the demand schedule is given below $350 300 250 Acres of Land Demanded $350 $300 100,000 200,000 300,000 $250 Land Rent Pure Land Rent Per Acre $200 $150 200 400,000 150 500,000 $50 100 600,000 0 $100 100 K 200 K 300 K 400 K 500 K 600 K 700 K 50 700,000 Number of Acres Demand for land at varying prices assume that the quantity of a certain type of land available is 300,000 acres and the demand schedule is given below $350 $300 $250 Land Rent • The pure rent per acre on this land will be ______ . • The total quantity of land rented will be _____ acres. • If landowners were taxed at a rate of $250 per acre for their land, the pure rent on this land after taxes would be ___ , but the number of acres rented would be ______ . $200 $150 $100 $50 0 100 K 200 K 300 K 400 K 500 K 600 K 700 K Number of Acres Demand for land at varying prices assume that the quantity of a certain type of land available is 300,000 acres and the demand schedule is given below $350 $300 $250 Land Rent • The pure rent per acre on this land will be $250. • The total quantity of land rented will be 300,000 acres. • If landowners were taxed at a rate of $250 per acre for their land, the pure rent on this land after taxes would be $0, but the number of acres rented would be 300,000. $200 $150 $100 $50 0 100 K 200 K 300 K 400 K 500 K 600 K 700 K Number of Acres YIELD PER ACRE ON THREE GRADES OF LAND Expenditure per Acre Land Quality $0 Grade A Land Yield 0 175 325 450 524 575 615 Grade B Land Yield 0 160 290 375 445 490 525 Grade C Land Yield 0 $100 120 $200 210 $300 290 $400 330 $500 360 $600 385 • If the product sells for $1.00 a bushel, how many dollars per acre should be spent on Grade A land: ____ Grade B land: ____ Grade C land: ____ • In a competitive market, what do you think the rental price would be for an acre of Grade A land: ____ Grade B land: ____ Grade C land: ____ YIELD PER ACRE ON THREE GRADES OF LAND $600 • If the product sells for $1.00 a bushel, how many dollars per acre should be spent on 575 615 Grade A land: 300 Grade B land: 200 Grade C land: 100 490 525 Expenditure per Acre Land Quality $0 Grade A Land Yield 0 175 325 450 524 Grade B Land Yield 0 160 290 375 445 Grade C Land Yield 0 $100 120 $200 210 $300 290 $400 330 $500 360 385 • In a competitive market, what do you think the rental price would be for an acre of Grade A land: $150 Grade B land: $90 Grade C land: $20
