Generally rent is used in a more wider sense. It mean hiring
charge e.g. the rent of a shop, car, Tonga, etc. in economics it is used as a
reward paid for the use of land.
According to Ricardo
“It is a payment made by a cultivator to the landlord for the
use of original and indestructible powers of the land”.
It can also be defined as
“The true surplus left after the expenses of cultivation”.
According to modern
economists
“Rent is a surplus or excess over the transfer evenings”.
Modern economists apply rent to all the factors of production
which do not have a perfect elastic supply.
Net rent:
The amount paid by the cultivators to the landlord for the
use of land only. It does not include other payments. It is just a reward for
the use of land.
Gross rent:
Gross rent is consists of net rent as well as other kind of
payments. They are as under.
i.
Wages:
A
landlord usually keeps employees for collection of rent, and look after of
land. The wages, which are paid to such workers by the landlord, is also
charged with net rent from the cultivator, when we add such wages with net rent
that become gross rent.
ii.
Interest:
If a
landlord invests a certain amount for the leveling of land, purchase of
implements or installation of tube wells. The reward of such investment is
charged in the form of interest with the net rent, which constitute gross rent.
iii.
Profit:
When a
landlord invests a certain amount on land, he undertakes risk. It is not
necessary that he may recover the amount invested. So some extra payment is
charged by the landlord in the form of profit. When we add such a profit with
net rent that constitute gross rent.
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