Quasi rent is the earning of capital equipments such as machineries, buildings etc., which are inelastic in supply, in short run. According to Marshall, it is only a temporary surplus, which is enjoyed by the owner of the capital equipments in the short run. This is due to the increase in its demand and it will disappear in the long run, if supply of the capital equipment is increased in response to the increased demand. It is also defined as the excess of total revenue earned in the short run over and above the total variable costs. Thus, Quasi Rent = Total Revenue Earned minus Total Variable Costs.
Ricardian rent is a payment made for the use of land whereas quasi-rent is a payment for man made factors such as buildings, machineries, etc. Ricardian rent Wage Fund Rate of Wages = Number of Workers exists both in short run and long run because supply of land is fixed in long run. But it is only a temporary earning due to increased demand.
Explanation
In the figure, P represents price. The firm maximises profit while it produces ON unit of output with 0PEN amount of total revenue. Now, the firm pays 0NBA amount of variable cost to the variable factor. This means that the residual of the total income, i.e., ABEP is the quasi-rent which goes to the fixed factor.
It is to be noted that the theory assumes that the firm operates under perfect competition. The quassi-rent can be divided into two parts. This has been shown with the help of Figure. In the figure, the area ABCD represents the total fixed cost, while PECD represents the excess (or pure) profit.
Thus,
Quasi-rent = TFC + excess profit. Or,
Excess profit = Quasi-rent – TFC.
In the long run, as supply increases, Quasi-rent becomes zero and the firm is in equilibrium, earning just normal profit.
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