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Situational Rent
Land may be described as inferior either because it is less fertile or it is unfavorably situated. As Ricardo stated, “the most fertile and the most favorably situated land will be cultivated first. If all lands are equally fertile rent will not arise unless a particular land enjoys advantage of situation”.

Thus according to Ricardo rent is due both to differential fertility as well as differential situation. The fact of the matter is that situation directly influences the paying lower transport charges earn situations near the market and a truck load of corn cost $ 200, 300, 400 and 500 respectively rent in the case of land A, B and C will be $ 300, 200 and 100. D grade land will however earn no rent.

Fig. shows a “land-rent triangle” which demonstrates that all the margin a makes no profit as the producer price is just equal to the costs of production and transportation. However for those who are located near the market they does exist some surplus which may be treated as rent.

In fig. OA is the cost of production per unit of output whereas the competitive market price. As distance from the market increases the cost of transportation per unit of output increases too. This will eventually wipe out the initial difference between the market price and the cost of production. The “land-rent triangle” is closed at B. at this point the producers makes no pure transportation cost increases with distance and wipes out the difference between the price and production cost.

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Demand Capital Characteristics Cross Demand Price Elasticity Factors Income Demand Demand Income Elasticity Demand Demand Price Elasticity Total Outlay Method Inductive Deductive Method Demand Supply Interaction Firm Equilibrium Increasing Utility Methods Monopoly Monopolistic Competition Demand For Capital Gross Net Interest Firm Perfect Competition Cost Theory Concepts Interest Isoquent Product Curve Land Importance Marginal Rate Substitution Producers Equilibrium Loanable Funds Supply Demographic Transition Capital Labour Characteristics Labour Division Labour Types Labour And Capital Economic Laws Characteristics Deductive Method Inductive Method Economic Laws Macroeconomic Analysis Microeconomic Analysis Economics Scope Large Scale Benefits Douglas Production Function Production Volume Factors Production Laws Large Scale Laws Production Function Production Significance Oligopoly Emergence Causes Oligopoly Classification Market Size Market And Oligopoly Market Monopoly Control Dumping Monopoly Monopolistic Competition Revenue Cost Nature Price Discrimination Competitive Market Long Period Price Short Period Price Perfect Competition Capitalism Problems Price Mechanism Price Mechanism Limitations Demand Principle Socialist Economy Problems Profit Dynamic Theory Profit Profit Uncertainty Profit Risk Theory Profit Theory Rent Kinds Rent Rent Modern Theory Quasi Rent Rent Ricardian Theory Situational Rent Demand Price Elasticity Factor Pricing Demand Affecting Factors Returns To Scale Isoquent Curves Production Factor Supply Land Productivity Factors Land Importance Labour Production Scale Land Characteristics Internal Economies Types Average Fixed Cost Average Variable Cost Gross Profit Constituents Theory Of Costs Long Run Marginal Cost