Economic rent

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Economic rent is a payment to a seller of a factor of production that is in excess of what the price should be, as measured by the supply price or the opportunity cost. In other words, economic rent is the surplus made by the seller, perhaps due to lack of competition.

There are four equivalent definitions of “economic rent.”:

(1) Economic rent is the increased payment for a (scarce) good due to its very limited supply.

(2) Economic rent is the amount that a payment exceeds the supply cost. The “rent” is the excess of a good’s actual price above the good’s supply cost.

(3) Economic rent is the increased payment for an input that is in perfectly inelastic supply.

(4) Economic rent is the payment of a factor of production in excess of the factor’s opportunity cost or supply cost.

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