3. Seasonal offers are used to create scarcity and encourage sales because seasons and holidays don’t last that long. The rent money she pays for a factory to produce her beverage line is an example of capital resources/ land/labor/ capital Which of these statements demonstrate the economic concept of scarcity? Because of the scarcity of apartments in the city, the rental rates are quite high. If all land is homogeneous but demand for land exceeds its supply, the entire land will earn economic rent by virtue of its scarcity. Prof. Continuing the two period example and considering only the first period, scarcity rent is given by the following graph. Scarcity rent is the price of land owing to its shortage, rather than to any particular quality of the land. It undertook research that showed that revenues from flights to a number of destinations from Heathrow greatly exceeded those from similar flights from Gatwick. Scarcity rent is an opportunity cost, appropriated by owner of resource. In this way, rent will arise when supply of land is inelastic. The scarcity of jobs in the town has caused the crime rate to increase dramatically. significant scarcity rent. Google Classroom Facebook Twitter. Email. Scarcity Rent. Scarcity. This minimum payment is known as TRANSFER EARNINGS and it represents an OPPORTUNITY COST.Thus, for example, a person might just be willing to work as a lecturer for a minimum of £1,000 per month because he could earn this amount working in … Four factors of production. Introduction to economics. Producer surplus is given by both areas because you don't actually pay for marginal user cost. Scarcity and rivalry. When the demand for housing is high, but supply is low, home prices often rise. Scarcity Rent: Scarcity rent refers to the price paid for the use of the homogeneous land when its supply is limited in relation to demand. The housing market is a good example of how supply and demand works within an industry. In general, the less plentiful things are relative to demand—whether buildable land, MarkMcGwire home run balls, or New York taxi medallions—the higher the scarcity rent. Key Idea: Scarcity rent is producer surplus … Failures P Externalities Harbor: port + resort hotel Port uses harbor for waste Resort hotel wants clean water (no pollution control, damage) Q MC P MC S D What leads to this? economic rent a money payment made for a FACTOR OF PRODUCTION that is over and above the minimum payment to keep it in its present use. For example, at Starbucks, pumpkin-flavored drinks go for $7.81, which is slightly higher than the usual price of $6.67. MUC = marginal user cost MEC = marginal extraction cost scarcity rent MUC MEC + MUC = P MEC D Q 2. For years, the scarcity of organic fuel has been inspiring scientists to come up with renewable energy sources. Lesson summary: Scarcity, choice, and opportunity costs. 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