Factors of Production – Land

The fast-paced development of world economy accompanies an exponential increase

in the complexity of the process of production. But whatever might be the evolution in
economics and production, the factors of production stand unscathed. When talking
about production, the first factor of production that strikes our mind is land.
Interestingly, the economic definition of land does not lie within the limits of just an
area.

Table of content

1 Factors of Production

1.1 Browse more Topics under Theory Of Production And Cost

2 Land as a Factor of Production

2.1 Free Gift of Nature

2.2 Fixed Supply

2.3 Permanent and has Indestructible Powers

2.4 Immobile

2.5 Has Multiple Uses

2.6 Heterogeneous

3 Solved Example on Factors of Production

Factors of Production
With increasing complexity in the world economy, the complexity of the production
process is sky-rocketing. Luckily, production still and will continue to rely upon a
certain set of factors, that enclose the ever-increasing complexities in their bubble.

These factors of production- land, labour, capital, and entrepreneur, always accompany
the process of production. Every possible aspect required for production is a part of
these four factors. Here, we will be talking about land.
Browse more Topics under Theory Of Production And Cost
 Meaning of Production

 Factors of Production – Labour

 Factors of Production – Capital

 Factors of Production – Entrepreneur

 Production Function

 The Law of Diminishing Returns

 Returns to Scale (Production Function)

 Production Optimisation
Land as a Factor of Production
A man with little or no knowledge of economics would think of the significance of
land as an area required for production. On the contrary, the definition of land in the
economics, of course, is an area, but also includes all the free gifts of nature like water,
air, natural resources etc. which affect production.

To point out, a factor of production can be a combination of work done by human

efforts and natural occurrences. In that case, there are some characteristics that ease out
this confusion by clarifying the factor of production-land.
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Free Gift of Nature

Every factor of production which comes under the umbrella of land should have no
supply price. To put it differently, land can be used for production without paying any
money to the ultimate owner i.e. the mother earth. Further, it requires no human effort.

Fixed Supply

Land is a strictly fixed factor of production. Obviously, the quantity of land in

existence will always remain the same and no human power can alter that. This means
that no amount of change in demand can change the supply of land. To point out, this
characteristic is evidence that the supply of land is perfectly inelastic.

However, any free gift of nature is abundant, when seen through the lens of a single
firm. Hence we can conclude that the supply of land is perfectly inelastic from the
perspective of an economy whereas it is relatively elastic from the perspective of a
single firm.

Permanent and has Indestructible Powers

Most of the features related to land are out of the realms of human power. We can only
degrade or upgrade the characteristics of land up to an extent. The quantity of land and
specifically the land itself is indestructible.

Immobile

Of course, land is a static factor. One cannot shift the natural resources from their
places of origin. Now some would argue that a factor categorized as land, say water,
can be taken to another place. However, you should appreciate the fact that the whole
reservoir of water cannot be shifted to another place at will. Further, the combination
of natural factors or characteristics of a given place is generally unique.

Has Multiple Uses

We can use land in a variety of ways, for various purposes. Hence, land has multiple
uses. However, its suitability for all uses is definitely not the same. For instance, we
can use a piece of infertile land to set up a factory but not for cultivation and
agriculture.
Heterogeneous

Obviously, no two types of land can be the same. There are a plethora of
characteristics which define a type of land and two instances of land are bound to
differ on at least one of these characteristics. For example, two patches of land can
differ in fertility, dimensions, composition and a lot of other characteristics.

Solved Example on Factors of Production

Q: Land is an active factor of production. True or False?

Ans: The statement is False. Land is a passive factor of production. It requires the help
of other factors, especially labour to be put to use.

B ROW SE
Theory Of Production And Cost

 Production Optimisation
 Returns to Scale
 The Law of Diminishing Returns
 Production Function
 Factors of Production – Entrepreneur
 Factors of Production – Capital
 Factors of Production – Labour
 Factors of Production – Land
 Meaning of Productionh