Rent (Economic)
Plain definition
In economics, rent is the payment to a factor of production in excess of what is needed to keep it in its current use — or simply the price of using land and natural resources.
In economics
Economists use 'rent' in two related ways: as the return to land (the classical factor), and as 'economic rent' — any surplus over opportunity cost, such as a star athlete's salary above their next-best alternative. Rent-seeking is spending resources to capture such surpluses without creating value.
Example
If a plot of farmland would earn nothing in its next-best use, the entire $5,000 annual lease is economic rent.
Common confusion
Economic rent is not the monthly payment for an apartment in everyday language; in economics it means the surplus a factor earns over its minimum required return.