This article will help you to learn about the difference between rent and quasi rent.

Difference between Rent and Quasi Rent

Rent of land, according to Ricardo and his followers, is a differen­tial gain or a producer’s surplus, and it arises on account of its absolutely fixed supply even in the long run. It is the surplus above the cost and it continues to exist even in the long run as the supply of land, being a gift of nature, is fixed for all the time to come. It is peculiar to land only.

But Marshall introduced and developed a new concept of rent what is known as quasi-rent to show element of rent in the incomes of man-made appliances and capital goods. Marshall defines quasi-rent (or near-rent) as “the short-run earnings of machines (or appliances of production made by men) minus the short-run cost of keeping it in running order.” Thus quasi- rent is the surplus of short-run cost of maintaining them. The earnings of land are rent proper, but the short-run net earnings of machines and of man-made appliances of production are quasi-rent.

There is a point of similarity between the short-run net income of machines and the income of land. In the short period, like the supply of land the supply of machines remains fixed; so machines in such a period can earn a surplus similar to rent of land. But, there is also a point of dissimilarity between these two earnings.


Unlike land, the supply of machines in the long run can be increased, and then the surplus element in their incomes will disappear. Thus, when the demand for fish increases, the fishermen may get excess earnings from their existing boats and nets, which are man-made appliances, in the short-run. But in the long run the supply of boats and nets will increase and so their excess earnings will disappear at that time.

From this it follows that the short-run income of machines is like that of land; it is not entirely rent, because such a surplus element in their earnings does not exist in the long run. For this reason, Marshall describes the short-run net earnings of machines and of man-made appliances of produc­tion as ‘quasi-rent’ in contrast with rent proper, which is the income from land only.

In modern terminology, quasi-rent is the excess payment made for any factor service which is short for the time being in limited supply for a short period. In such circumstances more is paid for the service than would really be necessary to maintain its existing supply. The quasi-rent may be elimi­nated either by an increase in supply, if this is practicable, or by a fall in demand.

In microeconomics quasi-rent, it is defined in another way. The excess above variable cost which the firm is able to earn in a short period is often referred to as the quasi-rent by the fixed plant in that period. So, Quasi- rent-Actual price of the product—Average variable cost (in the short period).

Let us measure output on the horizontal axis and price on the vertical axis. Both ATC and AVC curves are assumed to be U-shaped and MC curve passes through the minimum point of both the curves. Quasi-Rent

Suppose, BK is the initial aver­age revenue (as also the marginal revenue) curve faced by the entre­preneur. Profit-maximising equi­librium occurs at C, the point of intersection of the line BK and the MC curve. Equilibrium output is ON, and assuming labour as the only variable factor, total variable cost or total wage ­bill will be OLMN. The rental of the machine will be the area LADM, and the quasi-rent, area LBCM (i.e., greater than rental of the machine).

With the deterioration in the demand condition, quasi-rent may still exist but it will be less than the rental. With average revenue curve RS, the quasi-rent falls to zero. But, any curve below RS implies that even AVC is not covered and, therefore, it is rational for the firm to close down and just accept a loss equal to average fixed cost. This, however, indicates an impor­tant fact that quasi-rent can never be negative.

The term quasi-rent, proposed by Alfred Marshall, refers to the earnings of a factor of production, like machinery, equipment, etc., whose supply is inelastic in the short run, but not in the long run. Land is assumed to be in limited supply both in the short run and in the long run.

Hence, its remuneration is called rent. The term quasi-rent implies a remuneration similar to rent but not rent in the true sense. House-rent, however, is a peculiar borderline case which may be regarded both as rent and quasi-rent, depending on whether it is a rent for the building or ground-rent.


We can also offer another formal definition of quasi-rent. Quasi-rent of a machine is nothing but its total short-run receipts minus the costs of hiring the variable factors used with it and also of keeping the machine in running condition in the short run.

There are two further points about quasi-rent that are important. It can be earned by inanimate objects like machinery and appliances, equipment, etc., and also by persons who are efficient in every special sense of the term. Now, this sort of earning always refers to short run, because in the long run
the supply of durable goods can be increased and it is also not possible to monopolise the gains of specialised ability.

So, quasi-rent is competed away in the long run. Moreover, the question of transfer earning may also arise here, as in the problem of keeping the machine in order. Some part of the short-run earning of a machine must be separated for the purpose of maintenance. Thus, to conclude, there is no need for treating rent as a separate category of factor remuneration because like land, there are many other factors whose supply cannot be increased when their prices rise.