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Difference between Pure Rent and Quasi Rent

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The upcoming discussion will update you about the difference between pure rent and quasi rent.

(i) Pure rent is a payment to the land while quasi rent is paid to factors like labour, capital and organisation.

(ii) The supply of land is fixed permanently. Pure rent is therefore permanent whereas other instruments of production like machinery and buildings etc. are temporarily limited. Therefore quasi rent is temporary.

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(iii) With increase in population and subsequent increased demand for land, the pure rent has a tendency to increase progressively. But quasi rent diminishes progressively and disappears finally when the supply of factors of production becomes elastic. According to Stonier and Hague “in the long-run this rent disappears for it is not true rent but an ephemeral reward”.

(iv) Quasi rent arises when the factors are heterogeneous and their supply is perfectly inelastic. “These conditions are found in the labour and capital and therefore quasi rent emerges. But these conditions are not present in land.

(v) Quasi rent or income arising for the fixed factors in the short period becomes part of the cost of production in the long-run. Pure rent is the reward for the use of land.

(vi) Pure rent is a real surplus but quasi rent is one “of the nature of a surplus” because though it is a surplus in the short period it becomes a part of the cost of production in the long-run.

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Marshall’s parable of meteor stones explains the difference between pure rent and quasi rent. Marshall assumes three situations.

In the first situation a meteoric shower of stones falls at one particular place.

As these stones could be used for industrial purposes, the residents of the area pick up the stones. They will enjoy a pure rent equal to the rent of land. The stones, as the free gift of nature have the same property as that of land.

Their supply is perfectly inelastic to change in price. In the second situation the supply of stones would be perfectly elastic to changes in demand both in the short and in the long period. In this situation pure rent arises.

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In the third situation the supply of stones is neither perfectly inelastic nor perfectly elastic as in the first two situations. The short period fixed supply of stones can be increased in the long period in response to an increase in demand. Thus quasi rent accrues in the short period to people who found the stones. However this rent disappears in the long period.

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