How is rent related to transfer earnings in economics
- Transfer earnings are the minimum amount labour must be paid in order to keep it in its present use. It is an opportunity cost of labour or value of the next best employment foregone.
- Economic rent is the amount received by the factor of production labour above the minimum required to supply labour, it is the amount earned by labour above transfer earning. For example, if a doctor would leave the profession if her wage fell below sh. 100,000 a year and she currently earn shs.120,000, transfers earnings are sh.80,000 and economic rent is sh. 20,000. For most workers’ wages are composed of both elements. The ratio of transfer earnings to economic rent will vary, and depends largely on the elasticity of supply of labour – the more inelastic the supply of labour the greater the share of economic rent..
CATEGORIES Economics
TAGS Dr. Bbosa Science
