Study notes

Transfer Earnings and Economic Rent

  • Levels: A Level, IB
  • Exam boards: AQA, Edexcel, OCR, IB, Pre-U, Eduqas, WJEC

Economic rent is any amount earned by a factor of production, such as labour, above the minimum amount they require to work in a current occupation

Transfer earnings are the minimum reward required to keep factors of production, such as labour, in its current occupation.

Diagram showing transfer earnings and economic rent at the market equilibrium wage rate

When the labour supply is inelastic, then more of the reward to labour will be economic rent rather than transfer earnings

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