Land economics

In economics, land comprises all naturally occurring resources whose supply is inherently fixed.
E.g. all particular geographical locations, mineral deposits, and even geostationary orbit
locations and portions of the electromagnetic spectrum.

Natural resources are fundamental to the production of all goods, including capital goods.
Location values must not be confused with values imparted by fixed capital improvements. In
classical economics, land is considered one of the three factors of production (also sometimes
called the three producer goods) along with capital, and labor. Land is sometimes merged with
capital to simplify micro-economics. However, a common mistake is combining land and capital
in macro-analysis.

Income derived from ownership or control of natural resources is referred to as rent.

Land was sometimes defined in classical and neoclassical economics as the "original and
indestructible powers of the soil."[1] Georgists hold that this implies a perfectly inelastic supply
curve (i.e., zero elasticity), suggesting that a land value tax that recovers the rent of land for
public purposes would not affect the opportunity cost of using land, but would instead only
decrease the value of owning it. This view is supported by evidence that although land can come
on and off the market, market inventories of land show if anything an inverse relationship to
price (i.e., negative elasticity).

As a tangible asset land is represented in accounting as a fixed asset or a capital asset.

Land, particularly geographic locations and mineral deposits, has historically been the cause of
much conflict and dispute; land reform programs, which are designed to redistribute possession
and/or use of geographic land, are often the cause of much controversy, and conflicts over the
economic rent of mineral deposits have contributed to many civil wars.

Demand and supply of land resources

 The overall need of land resources

 The total land resources provided by the earth surface

 The physical and economic concept of supply of the resource available

 The physical supply of land: physical existence of land resources e.g. forest, mineral fuels.

 Economic supply of land: the availability of portion of the physical supply which man uses,
interest in the resources available for use, factors of demand and price. Thus, it results in
scarcity of the resource, abundance of the physical resource, accessibility, use/capacity,
  Demand-: associated with desire, want, need, aspiration, requirement for the land resources,

Factors affecting the supply of land resources

1. Natural limits on the land supply-: varies in terms of natural characteristics, general use
capacities,

The variations usually stem from differences in

i) Sunlight temperature

ii) Precipitation and access to water supplies

iii) Topography ad drainage

iv) Soil conditions and

v) Physical location with respect to market and transportation facilities.

 However, only about 46% of the earth’s surface is covered with good soils which are suitable for
crop use.
 Natural land characteristics have an important effect upon the economic supplies of land.
 They determine the physical suitability of resources for various uses.
 Economic, institutional, technological and field location factors usually determine the actual
amount of land resources that will be used at any given time (Okafor and Onokerhoraye, 1994).

2. The impact of economic factors-: the usage of land resources determines its economic
importance, compete with others for their use or control, put a price or value on them or
assume the costs associated with their development.

 The concepts of demand, price, cost and competition have effect upon the supplies of the various
types of land resources.
 Man is inclined to use land resources with the highest use capacity
 Competition between individuals and between land uses has effect on the land resources supplies
picture (Market forces)
 The supply of land resources available to each individual operator is limited only by his
willingness and ability to pay the going price asked for the resources he needs.
 Continued expansion of the high priority uses inevitably leads to a diminution of the other
supplies of land resources available.

3. The impact of institutional factors-: This involves cultural aspect such as custom,
government, law, public opinion etc. and tenure practices the law of the land and other
directives for individuals to have control, exploit, and use land resources to expand and
enlarge the opportunities available to others.

 The proximity of certain types of land uses e.g. cemeteries, parks, may influence positively or
negatively the use of nearby rural land.
 The institutional control resulting from land use decree of 1978 place control of the amount of
rural land an individual could possess for cropping, grazing and streamlined the process of land
acquisition.

4. Impact of technological factors-: the value of land resources is directly related to

people’s ability to use them. The economic supplies of land resources always reflect the
current level of technological development.

 Technological developments have impact upon the interaction of supply and demand
 Affect the nature and extent of the economic supplies of various resources by extended use of
existing supplies
 Facilitating the discovery and development of new sources of supply
 Provides substitutes which may enhance the value of some resources and reducing the need for
others
 Provides solutions to scarce supply of land by providing the drainage and similar land recovery
exercises

5. The impact of the fixed location factor-: fixed location in space, static, but some land
resources may be moved about e.g. mineral deposits, soil and forest products thus land as
space remains fixed and immobile.

 Affects human decisions regarding the value and use capacity of various sites
 Influences land utilization practice
 Facilitates private ownership and ties land values, uses, and ownership conditions to the local
environment; and
 Affects the legal description of properties

Land Supply

Land as a scarce resource

- Land is important resource for us to meet our basic needs for food and shelter. Eg. Land uses – grow
crops, build houses and roads, set up industries

- Population growing rapidly, increase demand of land for housing, farming, building of industries.

- Limited amount of land in each country and scarcity of land or shortage of land cause us to have limit
to amount of land we can develop - Land constraint.

- “Population grow” and “Land needed for our needs” so “Demand for land rising” but “Land shortage”
and “Land limited” , leading to “Land constraint” - Countries with this problem must find ways to
increase land supply and use the land in best possible way to meet needs of people.

- Land supply is fixed, limited or sometimes inhabitable so shortage of land.

Reasons for land constraints1. Rising demand for land - Population growth needs more land for
agriculture, housing, transport, water and Rapid population growth cause more land neededfactories.
- Population growth All areas have carrying capacity (carrying maximumfor human activities. number
of people in an area comfortably without straining supply of resources When people increase, available
resources are shared amongfor future use). more people, adding pressure to the land. - Increasing
demand for housing More land neededGrowing population leads to increase in demand for housing.
to build houses for people. Eg. New house estates developed in Singapore Punggol Theand Sengkang
to meet increasing demand for housing. - Growth of industries need to provide jobs for growing
population is important concern for countries By developing more manufacturing industry and
business, morearound the world. jobs created. Eg. In Singapore, manufacturing industries take up
over 10 percent To expand these industries more land isof Singapore’s total land area. As country
develops, more roads andneeded. - Development of transport systems railways have to be built.

2. Good transport network important for movement of goods and raw materials and for workers to
travel between home and workplace. Eg. In some city, over 20% of total land area is used for transport
facilities like roads, railways and car parks. - Increasing demand for arable land < flat land – relief > To
produce food to feed increasing population, country Arable Arable land - suitable land for growing
crops needs more arable land. land in short supply. Eg. Four fifth of earth land surface is unsuitable to
grow crops because it is too hot, too cold, too dry or infertile. - Increasing demand More people need
more recreational spaces for widefor recreational spaces range of facilities ranging from swimming
pool to golf course and theatres. Some land set aside for parks and nature reserves for people to enjoy
and relax in.2. Limited supply of land - Land only 30% of land surface and many not readily available for
use. - Areas like swamp, marsh, low-lying coastal areas are constantly water-logged or flooded with
water and desert too dry and hot to be used. (Not arable) - Land can also be damaged through mining or
poor farming practices. (Not useful if left in original state ) - Even if land suitable for human use, some
are reserved for military purposes or collecting water. Eg. Collect water – water catchment area, areas
of forest to collect and channel rainwater into reservoirs Eg. Military purpose – training area for soldiers
Eg. In Singapore, half of total land set aside for military and water collection purposes so only left limited
land for industry and housing.Responses to Rising demand for land - Rising demand for limited land
leads to competition between groups of people and people will have to decide the use of the land. - If
land used in one way, not possible for another purpose. Eg. If a land used for natural reserve, cannot
build more houses. - The cost of not being able to use the same piece of land for the next best use is
called opportunity cost. Eg. Opportunity cost is not having more land for housing. - Land constraint need
to be managed properly or will have problems. Eg. Increased competition cause conflict between
different groups of people as some may not be able to use the land as intended. - Responses to rising
demand for land : Increasing price of land , increasing supply of land , conserving land

3. Land area available for- Increasing the price of land When demand increase,use in country or city
(also called supply) is limited. available land area (supply) cannot meet with increase in demand, price
of land Some users willing to pay higher for available land and thismay increase. They way prices for
goods and services are setpush up the price of the land. based on their demand are called price
mechanism. Eg. In central Tokyo, rent of one bedroom apartment cost more than $1600 a month
because the land in city area is in high demand for limited supply of land and usually very expensive.
Increasing price of land is one way to tackle rising demand for land as it discourage some people from
using land, thus reducing demand.- Increasing the supply of land ( Land clearance, Land reclamation ,
maximizing use of existing Land clearance To increase amount of land to meet with demand
Fastestland) and easiest way Process whereby empty plots of land are created for various land uses
Carried out by demolishing old buildings or by clearing forest (deforestation) Effectiveness – when a
piece of land cleared, it can be developed for other uses. Eg. Old buildings cleared or forest demolished
free up land to build new buildings and facilities. Negative impact – during deforestation, habitats of
animals and plants destroyed and some of them may die while some even become extinct. This leads to
negative consequences for the Land reclamation Increase land supply by creating dry landentire food
chain. from area covered by water Eg. Swamp, lake or sea Process of recovering land that is damaged or
abandoned to make it usable again Common ways : landfill , empoldering , reclaiming derelict land
Effectiveness: Many countries successfully increase land area through land reclamation but there are
limitations to how much more land country can reclaim. 1. Current technology only allows reclamation
up to 15m high. Cost a lot more for deeper waters because more sand needed to fill area. Problem
worse if not enough sand in country and need to obtain somewhere else. Buying sand increase overall
cost. 2. for countries surrounded by others, there is limit to amount of land that can be reclaimed
because cannot extend too far out into sea without entering neighbor’sterritories. There is also limited
sea space for shipping activities. Negative impact on environment: coastal habitats (Eg. Mangrove
swamps, beaches) destroyed by land reclamation, marine life and birds living in them affected.

4. Land fill Create dry land from swampy areas, marshes , and shallow parts of the sea The areas are
drained and filled with material (Eg. Sand) to form dry land Stages : 1. Columns of sand called piles are
forced into the soft clay of the seabed to make it more stable. (Using machines) 2. A sand wall is built
around the area to reclaim to keep sea water out. Sand is loaded into the sea outside the wall to be
stored until further use. (Using boat) 3. The sand previously loaded into the sea is sucked and pumped
into the enclosed area. (Ships spread the sand in enclosed area while boat with machine sucks sand) 4.
The sand is compressed by rollers and a granite wall is built on the side facing the sea to prevent the
area from being eroded by waves. 5. Tress and other vegetation are grown or planted on reclaimed land
to prevent soil erosion and land is left to rest. The number of years the land needs to rest depends on
how this land will be used. Singapore is an example to use landfill to reclaim Empoldering Method of
reclaiming land from sea Involves use of polders ,land. also a way to control floods Polders – piece of
land in a low-lying area that has been reclaimed from a body of water by building dikes and drainage
canals. Usually carried out in low-lying coastal areas but can apply to further inland such as lakes
Common in countries that lies below sea level and is prone to flooding Eg. Netherlands one fifth land is
reclaimed from sea. Most successful project called Zuider Zee. Polders features: enclosed by dikes to
keep sea or river water out, dikes protect polder from erosion, continually maintained by systems of
drainage canals and pumps to prevent them from becoming water-logged. (suitable for cultivation)
Stages : 1. Dike constructed around area to be reclaimed to keep water from coming in. 2. Area drained
using pumps and drainage canals. 3. Reeds, a type of plant are sowed by aircrafts to help soil form 4.
After 3 years, reeds are burnt and fertile ash act as fertilizers for the soil. 5. After up to 15 years, polder
ready for growing crops, building houses and Reclaiming derelict land Natural disasters (Eg.
Forestconstructing roads. fire, severe floods) or human activities can cause damage to land. The land
will then be no longer useful for certain activities. Damaged land is known as derelict land. Causes : 1.
Improper farming practices

5. Eg. Fertility of arable land can be lost through poor farming practices. As crops grow, they take up
nutrients from the soil. Different harvests of crops are grown too quickly after one another and
insufficient time for soil to regain nutrients, hence losing soil fertility. Eg. Excessive ploughing of land
cause large amount of soil erosion as soil structure loosens, making it prone to erosion by water.
Nutrients are lost and soil no longer suitable for cultivation. 2. Mining activities While mining an area for
mineral ores, vegetation and soil have to be removed because minerals are found in the ground.
Enormous holes are dug and form dangerously deep mining pools when they become filled with
rainwater. Heaps of mining waste is left behind and it produces poisonous substance that contaminates
soil. Reclaimed by : 1. Making it arable again Eg. When derelict land form due to poor farming
practices,fertilizers can be added to the soil to restore nutrients removed. 2. Clearance Eg. If by mining
activities, damage greater and more work needed. Waste heaps need to be leveled out and mining pools
filled. Chemicals used to treat contaminated soil and new vegetation planted as protective cover against
soil erosion. After reclaim : Mining land can be used for agriculture, industry, housing, and recreation.
Eg. Mine restored for recreation – Malaysia Sunway Maximizing use of existing land Making full use of
landLagoon Theme Park Improvements in technology allow people to live in environments that were
previously unsuitable for living. Land use maximized as land not suitable before can now be used to
build houses or used for agriculture. Maximizing urban land In urban areas, popularity density very high
so great competition foruse Land use planning – Result of land use planning  Mixed land use :
land. process by which different areas on a piece of land are assigned different land Traditionally,
cities are planned on ones and each zone one function.uses (Eg. Industrial, commercial, housing,
leisure) People travel long distances in order to get from one zone to another.

6. In order to allow for land to meet needs of more users, countries develop mixed land use projects
where combination of shopping Various land uses are usually packedmalls,offices,houses, hotels in
one area. In London andin a small area, linked by pedestrian walkways and escalators. Singapore,
this project developed in small scale. Eg. Singapore – Suntec City Advantages(offices, shops, hotels all
within walking distance of one another) – 1. Many facilities located within walking distance so people
enjoy convenience of having homes, jobs, wide range of services within same area. 2. Variety of
activities carried out within area meet needs of more users, thus maximizing.

Disadvantages –

1. In many cities, creation of mixed land useurban land use areas require much construction and
reconstruction of new and old building and transport network. Can be costly.

2. Locating residential areas close to other functions (Eg. Industries, shopping areas) may lead to traffic
congestion, noise Highand air pollution due to increased amounts of human and vehicle traffic.
Technology advances over years enable taller buildingsdensity building : These areas are
highconstructed where land in scarce and in high demand. density areas because there is too many
people working or living per unit area. Eg. HDB in Singapore plan to build 30 storeys or more in order to
maximize land use. Most of the flats located in more established housing estates. (Eg. Bishan,

Advantages –

1. MoreToa Payoh, close to city centre like Tanjong Pagar) people can work or be housed in small
piece of land. This frees up scarce land for other use. (Eg. Conservation as nature reserves or military
training areas) 

2. Helps reduce rate at which country’s remaining green space developed. Disadvantages – 1. Large
number of people in small area results in crowded environment, traffic congestion; higher noise levels
that increase stress level among people and reduce quality of their life.Maximizing agricultural land
use Look for land to grow more food crops to feed increasing populations. Irrigation :

7. Watering of crops by artificial means , allow farmers to grow crops in areas with water shortage ,
and ensure their crops receive just Water channeled through irrigation pipes fromthe right amount of
water certain water source (Eg. River , lake , places to where water is scarce)

Advantages –
1. Ensures regular supply of water, allow farmers to grow greater amounts and wider variety of crops.

2. Maximize the use of land as area previously unsuitable for cultivation is now made arable.

3. Computerized irrigation system water plants automatically and efficiently, reducing need for

Disadvantages –

1. If not proper maintains, irrigation canals canhuman labor. hold stagnant water and lead to breeding
sites for bacteria, mosquitos and other pest.

2. With poor drainage, irrigation causes land to become water- logged and damage crops.

3. River water used for irrigation contain large amount of dissolved mineral salts that damage crops.

4. Can be expensive to construct especially if a dam needs to be built across a waterway to make a
reservoir. Hilly areas unsuitable Arable and flat land limited (Eg. Japan). Terracing : for farming
because of steep slopes cause water to run off the slopes very quickly and very little water retained in
soil and plants will not grow well. Rain also erode soil and wash away nutrients and plants not enough
water or nutrients to grow well. Difficult to operate modern farm machinery on steep Terracing – 
Cultivation on slopes made possible by terracing. slopes. involves creating flat strips of land by cutting
series of steps into hill Increase supply of arable land as flat land more favorable forslopes.
Characteristic: low walls built at end of each step, walls calledcultivation. bunds help to slow down
runoff of rainwater so it can seep into soil and absorbed by plant roots, walls of terraces hold water in
enclosed area and

Advantages –

1.created flooded conditions needed for growing crops (Eg. Padi) Inexpensive method of increasing
area of arable land

2. Bunds used in terracing prevent soil from being washed away

3. Strips of flat land created by terracing also make it possible for modern machinery to be used, making
farming more Disadvantages –efficient

8. 1. Terraces are hard to construct and a lot of human labor, energy, time needed to cut steps into hill
slopes 2. a lot effort needed to maintain terraces after they are constructed. If bunds damaged, they
may not Maximize Soil-less farming : hold the soil back, resulting in soil erosion. Enable crops to be
grownland for agriculture by growing crops without soil Without soilcloser together , maximizing
land use for agricultural purpose Advantages – 1.agriculture – soil-less farming Eg. Hydroponics,
aeroponics Plants grown by soil-less farming can be grown closer together and more crops can be
grown on a single area of land at the same time. 2. Found to be effective in increasing output of crops as
sufficient nutrients is delivered and distributed evenly at regular intervals. The controlled conditions also
prevent Disadvantages – 1. Farmers must invest in highgrowth of weeds or insects. technology
equipment and specially prepared nutrient solution for plants which may be too costly for farmers
without enough funds. 2. May not be practical in countries where farmers do not receive enough
training to enable them to operate As country develops, demand forhigh technology equipment-
Conserving Land land to build house, industries and other facilities will naturally increase. While these
developments benefit people, country’s forest and other nature areas  Government need to make
plans for conserving land. should be protected. Conserving land – careful use of land resources to
ensure that damage is kept to One way to conserve land is to set aside land as the minimum nature
reserves where land is carefully managed to protect wildlife , plants , other natural features and provide
special opportunities for study or research Eg. In Singapore, 5% of total land area is set aside as nature
reserve. Eg. Sungei Buloh Wetland Reserve located at northwestern coast of Singapore. Home to 126
species of birds only found in the area and protected for its natural heritage. .