Rent is ordinarily taken to mean the price paid for the services of a durable good, in particular land and buildings. Thus, a building can be used by payment of rent just as furniture can be. This is called Contractual Rent. But in economics, rent acquires a more specific meaning. According to modern economists, payment for the hire of a factor over and above the minimum amount needed to bright forth its supply is rent.
The entire payment made to a factor of production whose supply is completely fixed is called rent because the fixed factor cannot be transferred to any other use. Thus, the minimum payment required to keep the fixed factor in its current use is zero. Rent in this sense is a surplus which is not confined to land alone but can be available to any other factor of production whose rewards happens to be excess of the minimum amount necessary to keep that factor in its present occupation. This minimum amount necessary to keep a factor in an occupation is called its supply price. If the factor is in scarce supply, that is, if its demand is greater than its supply, the actual price paid to it will be greater than its supply price (or the minimum price acceptable to it). This surplus over and above the supply price of the factor will be its rent.SUBMIT ASSIGNMENT NOW!