Chapter 14 Land Edco 2012 Positive Economics Definition
- Slides: 8
Chapter 14 Land © Edco 2012. Positive Economics
Definition of Land As a factor of production, land is anything provided by nature that helps in the production of output, including goods, services and wealth. The return to land is rent. © Edco 2012. Positive Economics
Economic Characteristics of Land is fixed in supply. Land doesn’t have any cost of production/the earnings of land are economic rent. It is a non-specific factor of production. The price of land does not affect the quantity available. Lack of mobility. © Edco 2012. Positive Economics
Why is land considered to be a unique factor of production? Land is a gift of nature and therefore has no cost of production to society as a whole. It is fixed in supply – the supply of land as a whole of an economy is fixed. © Edco 2012. Positive Economics
Demand for Land The demand for land is a derived demand, i. e. land itself is not demanded in its own right, but is sought for the goods it helps to produce. The demand for land depends on its MRP. High rents are caused by high prices. Land use – goes to the highest bidder. © Edco 2012. Positive Economics
What are the factors that influence the price paid for land? Demand for private houses Road building Business demand Public amenities Government intervention © Edco 2012. Positive Economics
What factors need to be considered before deciding where to locate a factory? Labour and wage rates Cost of land Nature of the product – Weight losing – Weight gaining – Footloose Availability of infrastructure Government influence © Edco 2012. Positive Economics
David Ricardo (1172 – 1823) The Principles of Political Economy and Taxation Theory of rent Law of comparative advantage Accepted the subsistence wages theory/iron law of wages © Edco 2012. Positive Economics
