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FIXED COST: In general, cost that does not change with changes in the quantity of output produced. More specifically, fixed cost is combined with the adjectives "total" and "average" to indicate the overall level of fixed cost or the per unit fixed cost. Fixed cost is incurred whether of not any output is produced. The same fixed cost is incurred at any and all output levels. This means that total fixed cost is, in fact, FIXED. However, it also means that average fixed cost, or fixed cost per unit, declines as the output level increases. Spreading out $100 over 1,000 units gives a lower per unit fixed cost that spreading out $100 over 10 units.
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                           RENTAL INCOME OF PERSONS: The official item in the National Income and Product Accounts maintained by the Bureau of Economics Analysis measuring rent earned by the household sector for supplying land and related factor services. This is one of five official factor payments making up national income. The other four are compensation of employees, net interest, corporate profits, and proprietors' income. Rental income of persons is typically the smallest of the five factor payment categories, usually less than 5 percent of national income. In principle, rental income of persons seeks to capture payment earned by owners for the use of their land and natural resources. In practice, however, this official entry in the National Income and Product Accounts also includes payments for assorted capital goods attached to the land. More specifically, rental income of persons includes three types of payments.- First is rent paid for using the surface area of land, which is largely based on location. An acre of land located in the hubbub of downtown New York City commands a significantly higher rent than an acre of land located in the sparsely populated plains of North Dakota.
- Second is rent paid for the natural resources of the land, including fossil fuels, minerals, water, vegetation, and wildlife. These are frequently referred to as royalty payments. Some of the more common royalty payments are to landowners fortunate enough to live atop pools of crude petroleum.
- Third is rent paid for using the capital attached to the land. While ideally the rental payments for space and location of land would be separated from payments made for the use of capital, this is difficult to do in practice. The rent paid to live in a house close to work or school is based partly on the house itself and partly on its location near work of school.
Because a portion of rental income of persons is payment for the use of capital goods, it receives a capital consumption adjustment before being included as national income. The capital consumption adjustment used to derived net domestic product is part of gross domestic product, but not part of national income. As such, any depreciation of the capital attached to the land generating rental income is deducted before calculating the rental income of persons.
Recommended Citation:RENTAL INCOME OF PERSONS, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: May 2, 2024].
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