Ground Rent - factor income landowner.

Feature of the ground as economic resource is its limitation. Unlike the capital the ground is motionless. Opportunities of expansion of the agricultural areas are rather insignificant. In the majority of the countries the tendency to reduction of the agricultural areas as consequence of development of municipal economy and an infrastructure is observed.

The factors influencing the offer of the ground, fertility and position are. It is natural, that the quantity of the good ground around of concrete city is limited doubly: both by quantity, and on quality.

Fertility, for example, depends on quality of ground, a climate, character of applied technics, labour skills and a know-how of workers.

The fixed character of the offer of the ground means, thatthe curve of the offer is absolutely not elastic. The offer of the ground cannot be increased even in conditions of a significant rise in prices by the ground.

Demand for the ground is non-uniform. It includes 2 elements: agricultural and not agricultural demand. The curve of demand for the ground will have a negative inclination. It is connected by that in process of involving the ground in economic circulation it is necessary to pass from the best on fertility of the grounds to average and the worst. The law of a decreasing fertility of the grounds has been deduced in XIX century by D.Rikardo.

Agricultural demand for the ground is derivative of demand for the foodstuffs. It develops of demand for production of plant growing, animal industries, etc. Agricultural demand for the ground considers a level of fertility of ground and an opportunity of its increase, and also a site (a degree of remoteness from the centers of consumption of the foodstuffs and raw material).

The demand for land is based on the same factors as the demand for labor and the demand for capital — the value of marginal product of land. Profit-maximizing firms rent the quantity of land at which the value of marginal product of land is equal to the rental rate of land. The lower the rental rate, other things remaining the same, the greater is the quantity of land demanded.

There are kinds of rents: differential and absolute. The differential rent exists in two forms: differential rents I and II.

The reason of differential rent I is the monopoly for the ground as object of a facilities. Its essence consists that businessmen - tenants who use the best and average ground areas on quality, possess своею sorts monopoly for the ground as on object of a facilities in the sense that they do not suppose appendices to it of the capital of other businessmen, exclusively receiving additional profit of the best and average ground areas on quality. It is monopoly порождена limitation of the ground, suitable for agricultural processing and заметностью its various facilities. Feature of pricing is connected with the given monopoly on production of an agriculture also.

As a result more high efficiency work on the best and average sites of the ground an output of production on a unit of cost above in comparison with the worst sites. As a result the additional profit is formed, which ground proprietors appropriate in the form of the differential rent. Differential rent I on fertility is equaled differences between public by manufacture of the agricultural products, defined by conditions of the worst site and the individual whole of their manufacture on more fertile grounds. If the differential rent 1 is connected with natural fertile ground the differential rent II is connected with artificial fertility of the ground, caused with additional capital investments for improvement of fertility of ground.

The absolute rent is a surplus of profit above average profit arising, on all and on the worst on quality of sites of the ground.

Except for differential and absolute rents, on the separate ground areas there can be an exclusive rent. The reason of its formation is the monopoly price which is established on the some people, products of an agriculture are rare.

 

 

 

Theme № 10. National economy: content, structure and measurement of results. Lecture 10.1. The structure of the national economy.

2. System of National Accounts (SNA). Gross national product (GNP), gross domestic product (GDP). Characteristics indicator of GNP. Methods for calculating GNP
3. Other indicators of system national accounts








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