Bài giảng MicroEconomics - Chapter 014 Rent, Interest, and Profit

Rent, Interest, and ProfitChapter 14Chapter ObjectivesEconomic rentThe loanable funds theory Interest rate variationEconomic profitsDistribution of U.S. earnings14-2Economic RentPrice paid for land and other natural resources Perfectly inelasticity supplyChanges in demandA surplus payment14-3Determination of Land RentAcres of LandLand Rent (Dollars)L0D1D2D3D4SR1R2R30ab14-4Economic RentApplication: a single tax on landHenry George’s proposalSingle tax movementCriticismsProductivity differencesAlternative uses of land14-5InterestPrice paid for use of moneyStated as a percentageMoney is not a resourceLoanable funds theory Supply of loanable fundsDemand for loanable funds14-6Market For Loanable FundsQuantity of Loanable FundsInterest Rate (Percent)0DSi=8%F0The equilibrium interest rate14-7Loanable Funds TheoryExtending the modelFinancial institutionsChanges in supplyHousehold thriftChanges in demandRate of return on investmentOther participants14-8Time-Value of MoneyMoney more valuable the sooner it is obtainedAbility to earn interestCompound interestFuture valuePresent value14-9Range of Interest RatesThere are many interest ratesWhy do interest rates differ?RiskMaturityLoan sizeTaxabilityPure rate of interest14-10Role of the Interest RateRelationship toTotal outputAllocation of capitalR&D spendingNominal and real ratesApplication: Usury LawsNonmarket rationingGainers and losersInefficiency14-11Nominal Interest RatesShort-Term Interest Rate, 2007New ZealandHungaryMexicoAustraliaUnited KingdomUnited StatesSouth KoreaCanadaSwedenSwitzerlandJapan0 2 4 6 8 10Source: Organization for Economic Cooperation and Development14-12Economic ProfitExplicit costsImplicit costsPure profitTotal revenue less explicit and implicit costsRole of the entrepreneurNormal profit14-13Sources of Economic ProfitStatic economyRisk and profitInsurable and uninsurable risksChanges in economic environment, structure of economy, government policyInnovations and profitMonopoly and profit14-14Economic ProfitFunctions of profitProfit and total outputProfit and resource allocationIncome sharesLabor receives 70-80%Rest is rent, interest, profit14-15The Price of CreditEffective interest ratesDiscounting a loanRepaying a loan in installmentsEffects of compoundingTruth in Lending Act 1968Truth in Savings Act 1991Fees and teaser ratesLet the borrower beware14-16Key Termseconomic rentincentive functionsingle-tax movementloanable funds theory of interesttime-value of moneyfuture valuepresent valuepure rate of interestnominal interest ratereal interest rateusury lawsexplicit costsimplicit costseconomic or pure profitnormal profitstatic economyinsurable risksuninsurable risks14-17Next Chapter PreviewNatural Resourceand Energy Economics14-18