Question

explain economic rent and what it might imply about the economic profitability of the restaurant.  

Answer 1

Economic rent refers to the paying the cost to the services rendered by the factors of the production beyond the expected level of payment according to the necessary need. Such necessary needs are mainly focused to pay extra either for any of the factor input. For example. in order to favor the development of the business paying more for the important factor of production like Land. Suppose if one trader wants to open a stationary shops near colleges and school in the city center not any main attractive area, then he or she pay the rent more in order to do quality service to the students of colleges and schools near by their area. In another way Economic rent can also explained with the help of depicting in the way of paying rent for acquiring Patent rights to protect the firms original ideas and procedures of production of goods and services from the misusing of other firms in the global market imitating the same ideas which already registered with the patent rights. So Economic rent refers to paying monetary compensation to important things which increases the goodwill of the firms rather than earning profit through large volume of sales.

The Economic rent concept greatly applies to the economic profitability of the restaurant. For the setting up of one new restaurant, the investors need to make research on the following operational factors such as quality of the food, location of the business and profit strategies. As we aware that food is considered as an basic necessity of the life. So the food industry should be function with the overwhelming support of the public. So apart from earning profit through the service, the restaurant should focus on providing different and unique supply of food to the people. Here Restaurant can procure many organic vegetables and organic grains to be used in the food items. Nowadays people in the US prefer chemical-free food items in order to have a health fit body with the use of unique intake. So food restaurant firms pays more monetary compensation to procure the organic vegetables and organic millet. So this is extra cost incurred by the firms beyond its daily expenses. When the firms pays more than they intended to get normal profits are considered as the economic profitability. If the particular firms helps customers to feel by having good quality and healthy traditional foods by serving uniquely captures the goodwill. Such goodwill of the restaurant are possessed only when the firms pays extra to provide quality and organic food with the main ingredients of organic substances. Then they can able to reap the profits more than what they expect. This is the main reason for the good effects of economic rent on applying to get economic profitability of the restaurant firms.      .