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14
Rent, Interest, and Profit
McGrawHill/Irwin Copyright © 2012 by The McGrawHill Companies, Inc. All rights reserved.
Economic Rent
• Price paid for land and other natural resources
• Perfectly inelasticity supply • Changes in demand
• Asurplus payment
LO1 14-2
Economic Rent
S
R1
R2 D1
D2 R3
a 0
D3
b
L0 Acres of Land
D4
LO1 14-3
Economic Rent
• Land ownership: fairness vs. allocative efficiency
• Application: a single tax on land •Henry George’s proposal •Single tax movement •Criticisms
LO1 14-4
Interest
• Price paid for use of money • Stated as a percentage
• Money is not a resource
• Interest rates and interest income • Range of interest rates
•Risk •Maturity •Loan size •Taxability
LO2 14-5
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