Economic rent
Economic rent is income from controlling a scarce resource that exceeds the minimum payment needed to keep that resource in its current use.
Opportunity cost: The value of the best alternative forgone when a choice is made. The next-best use sets the minimum compensation needed to keep a resource in its current use.
Land rent: Payment or surplus associated with the use of land. Land is fixed in supply, making it a central example of scarcity-based rent.
David Ricardo: An English political economist whose work shaped classical theories of value, distribution, and international trade. Ricardo made differential land rent central to his account of income distribution.
Economic profit: Revenue minus both explicit costs and the opportunity costs of all resources used. Economic profit is what remains after opportunity costs, whereas rent identifies surplus tied to a resource.
Supply and demand: A model of how buyers’ willingness to pay and sellers’ willingness to supply shape prices and quantities. When supply cannot expand, demand can raise prices and generate rent.
Patent: A time-limited legal right to exclude others from making, using, or selling an invention. Exclusion can let an inventor earn returns above the minimum needed to develop and supply an invention.
The Principles of Political Economy and Taxation: David Ricardo’s 1817 book on value, rent, wages, profits, and taxation. Its opening treatment of rent established a lasting classical formulation.
Accounting profit: Revenue minus a firm’s recorded explicit expenses. Accounting profit excludes implicit opportunity costs, so it does not isolate economic rent.
Reservation price: The lowest price at which a seller will accept a transaction, or the highest price a buyer will pay. A resource holder’s minimum acceptable return helps distinguish rent from necessary payment.
Monopoly: A market structure in which one seller supplies a product without close substitutes. Restricted competition can create monopoly rents through prices above competitive levels.