Some Factors of Microeconomics: Rent, Interest and Profit..

Before beginning the topic it will be beneficial to explain Economic Resources and Resource Pricing.
Economic Resources
are the resources required to produce goods and services. They are also known as Factors of Production. They are; Land, Labor, Capital, Entrepreneurship. These are the essentials of economic activity.

When we evaluate these resources as per their productivity it is called Resource Pricing. Briefly Resource Pricing submits to calculation of the value of Factors of Production that reflects its economic efficiency.

Here we are going to read about the pricing of three resources e.g. Land, Capital, Entrepreneurship
Land & Rent
Capital & Interest
Entrepreneurship & Profit

Land & Rent

In economics Land is defined as raw land. It includes minerals buried in the land, corps, timber etc. Any kind of construction on land is not considered. Land’s productivity depends upon these three factors; Site, Fecundity, Minerals. These are the three basic factors that determine the productivity of the land.

Productivity of land can be enhanced by utilizing it at its lot.Demand of land is determined by firm’s MRP curve. Demand is the only determinant of Rent because supply of land is fixed. Supply of land is vertically fixed. It cannot be increased or decreased as land is not portable.

Rent is the payment of exploitation of land. It is the product of high demand and fixed supply of land. Price directs the use of land in its most productive perspective. Rent will be higher if it is generating high yield.

Economic Rent is a technical term economists use to present the excessive return by a factor of production. The surplus profit earned by land by virtue of its present use can be termed as Economic Rent.

Capital & Interest

In business or economics Capital refers to the investment made to start or run the business efficiently. It can be in the form of money, shares, plant, machinery or equipment required to run the business. Demand of capital is determined by firm’s MRP curve.  Creditable funds are one of the important financial resources. There supply is never fixed. Supply changes as the interest rate fluctuates.

Interest is the evaluation of capital. It is the value of productivity of capital. Money is not productive by itself so interest is paid in upshot of means of production which are attained with the help of it.

Determinants of Interest Demand and supply are the determinants of interest. They decide the interest rate.  is managed by monetary policy and demand for money is affected by its transaction demand and asset demand.
Economic Effect
It affects the economic activity as it manipulates the consumer purchases and capital investment decision.

Entrepreneurship & Profit

Entrepreneurship is the act of undertaking innovations, business and finance in order to transform innovations into economic activity. In economics it is considered a factor of production in concert with other three factors; Land, Labor and Capital. Entrepreneurial spirit is characterized with innovation, risk assessment and an essential element to adapt the ever changing market conditions.

Profit It is the valuation of the entrepreneurship. It is a financial benefit that is taken in when total revenues exceeds the explicit and implicit costs, taxes etc essentials to keep the business functional. All profits gained go to the owner of the enterprise. He decides where to spend this profit. It is calculated as:

Profit = T. Revenue – T. Expenditure

It is classified into;Normal Profit It represents the total implicit and explicit opportunity costs of an enterprise. It is the minimum profit required for the company to sustain in market.

Economic Profit It is the Pure, Abnormal or Supernormal profit. It is characterized with change in tastes of consumers, improbability in economic scenario, innovations, entrepreneurial decisions etc. It is the most case of monopoly, oligopoly etc.

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