Quasi-Rent

We owe to Marshall, the eminent neo-classical economist for introducing the concept of Quasi-rent to economic theory. Quasi-rent is an extension of the Ricardian concept of rent to the short-sun earnings of capital equipment such as machinery. The supply of specialized machinery in short-run is absolutely fixed. Its cost production is not relevant once it is produced. So its earnings depend upon the demand conditions for it. The earnings are surplus and are similar to land rent. Since in the long-run supply of capital equipment increases in response to increased demand the surplus over cost of products will disappear. But land is inelastic in supply even in the long-run and hence will earn rent. But machines will just cover their cost of production. Since the machineries earn a surplus only in the shortrun. Marshall preferred to call their earnings in the short-period as quasi-rent rather that rent.

So we can define quasi-rent as “the temporary excess income which can be earned in the short-run by man made factors (machineries) but which will disappear in the long-run as the supply of such factor increases is known as quasi-rent.”

However some maintenance costs are required to be incurred in the short-run to keep the machinery in running order. Therefore Marshall defines “quasi-rent as the short-run earnings of a machine minus the short-run cost of keeping it in running order.”