Economics

pradeeppdy
Finance Junkie
Posts: 258
Joined: Thu Sep 20, 2012 3:42 pm

Economics

Postby pradeeppdy » Tue Oct 23, 2012 8:11 am

Can anyone explian to me what is economic rent with example and how it differs from cost?

Tags:

content.pristine
Finance Junkie
Posts: 356
Joined: Wed Apr 11, 2012 11:26 am

Re: Economics

Postby content.pristine » Thu Oct 25, 2012 11:45 am

Hi Pradeep,

Economic Rent is also known as scarcity rent. It is the extra amount of money needed to pay for more of something, in case the demand increases (shift in demand curve)

The more inelastic a good’s supply, the more amount of money you need to pay for the same increase in demand as compared to something less elastic.

For example, if a unique painting (inelastic supply) is being priced (consider an auction), any increase in demand results into a high change in price. Compare this to an increase in laptop prices. If the demand of laptops increases, the producers would just produce more of them, hence the supply of laptops would be elastic and the prices of laptops will not go up significantly.

The Economic Rent would be the difference in costs between when demand is higher and when the demand is lower.

Hope this helps!
8-)

pradeeppdy
Finance Junkie
Posts: 258
Joined: Thu Sep 20, 2012 3:42 pm

Re: Economics

Postby pradeeppdy » Thu Oct 25, 2012 12:08 pm

thanks


Return to “CFA Level I”



Disclaimer

Global Association of Risk Professionals, Inc. (GARP®) does not endorse, promote, review or warrant the accuracy of the products or services offered by EduPristine for FRM® related information, nor does it endorse any pass rates claimed by the provider. Further, GARP® is not responsible for any fees or costs paid by the user to EduPristine nor is GARP® responsible for any fees or costs of any person or entity providing any services to EduPristine Study Program. FRM®, GARP® and Global Association of Risk Professionals®, are trademarks owned by the Global Association of Risk Professionals, Inc

CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by EduPristine. CFA Institute, CFA®, Claritas® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Utmost care has been taken to ensure that there is no copyright violation or infringement in any of our content. Still, in case you feel that there is any copyright violation of any kind please send a mail to abuse@edupristine.com and we will rectify it.