#2-1-3-economic-rent #2-1-types-of-profit-measures #cfa-level-1 #economics #has-images #microeconomics #reading-15-demand-and-supply-analysis-the-firm #section-2-objectives-of-the-firm #study-session-4
The surplus value known as economic rent
results when a particular resource or good is fixed in supply (with a vertical supply curve) and market price is higher than what is required to bring the resource or good onto the market and sustain its use
. Demand determines
the price level and the magnitude of economic rent
that is coming from the market.
is the price level that yields a normal profit to the business that supplies the item.
When demand increases from Demand1
, price rises to P2
, where at this higher price level economic rent is created.
The amount of this economic rent is calculated as (P2
) × Q1
. The firm has not done anything internally to merit this special reward: It benefits from an increase in demand in conjunction with a supply curve that does not fully adjust with an increase in quantity when price rises.
If you want to change selection, open original toplevel document below and click on "Move attachment"
|status||not read|| ||reprioritisations|
|last reprioritisation on|| ||suggested re-reading day|
|started reading on|| ||finished reading on|