Monday, November 17

Economic rent vs. opportunity costs

Economic rent
The difference between what an owner of a factor of production (such as land, capital or labor) receives and the opportunity cost for that owner.

Opportunity cost
The benefits the owner could have received by taking an alternative action.

Size of economic rent and opportunity cost
Determined by the elasticity of supply for that particular good or service.

Tips:
Economic rent is different from rent.

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