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Meaning of Quasi-Rent in Economic Theory

Here, we understand the Concept, Meaning of Quasi Rent in detailed.

Meaning of Quasi-Rent in Economic Theory
The Concept of quasi-rent was first introduced in economic theory by Prof. Marshall to refer the short period returns earned by factors of production other than land.
According to him, the quasi- rent is only a temporary surplus which is enjoyed by the owner of the capital equipment in the short run due to the increase in the demand for it and which will disappear in the long run due to the increase in the supply of capital equipment in response to the increased demand.
Marshall calls it 'quasi-rent' because it partakes the nature of 'rent' as its supply is limited and at the same time quasi because the limitation of its supply is not permanent but is more or less temporary.
We will understand this Concept by an Example:
The supply of machinery, capital equipment, buildings, etc. is fixed in the short period. Now if their demand increases their supply cannot be increased in the short period, nor other things can be converted in the machinery or other capital equipment. The result is that the owners of machinery, capital equipment, buildings, etc. start getting higher earnings, that is, they earn a surplus over their normal income. This surplus is not competed away in the short run because the supply of machines or buildings cannot be increased over night.
But in the long run machinery and other capital equipment stands on a very different footing from land or other natural abilities.
Machinery, capital equipment, buildings, etc. are man-made instruments of production and therefore their supply can be increased in the long run to meet the increase in their demand. Thus, as a result of the increase in the supply of, machines, their excessive earnings will be competed away, and they will just earn enough to maintain them in running order and provide only normal profit to the entrepreneur. Quasi-rent therefore, disappears in the long run.
Prof. Stonier and Hague point out, "The supply of machines is fixed in the short run whether they are paid much money or little, so they earn a kind of rent.
According to him, In the long run this rent disappears for it is not true rent, but only an ephemeral reward - a quasi rent.


Quasi-rent is a short run phenomenon
Disappears in the Long run due to the increase in the supply of machines
Meaning of Quasi-Rent.
Kinnari
Tech writer at NewsandStory
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