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Economic Rent
 Worker in Tesco- can be easily replaced.
 David Beckham- Premier league footballer- skills &
beauty No duplicate of him around that can do the
same job!
 Tesco will drive down the wage
Quasi Economic Rent
 Quasi Economic Rent: refers to economic rent of a
temporary nature e.g. patent on specific medicine for 2
years for a specific firm e.g. Allergan. However after
the 2 years, patent runs out and they must show how
to make it.
Graph for Economic Rent &
Transfer Earnings
Goals for today’s lesson
 Recap on the factor markets
 Understand the term land
 Outline components of land
 Explain the economic characteristics of land
 Analyse the demand for land
Land
What is Land?
Land:
 Factor of production,
 Anything provided by nature that helps in the
production of output, including goods, services
and wealth
Now it’s your turn...
Think, Pair, Share
 Think on your own first and write down some of the
components of land.
1 minute
 Then turn to their neighbour (pairs) and discuss
some of the key points and see if you can come up
with any more ideas.
2 minutes
 Feedback your ideas to the class
Components of Land
Agricultural Land
Produces food stuff- growing cereal crops, fruit and
vegetable and the provision of pasture for animals.
Rivers, lakes and seas
Water is a vital raw material for the production of many
materials. Fishing and fish-farming & hydroelectric
power are important uses.
Components of Land
Mineral wealth and natural resources
Valuable source of energy eg: oil, coal, natural gas and
turf
Forests
Supply timber needed in the construction industry,
furniture making, and the paper, printing and
packaging industry.
Components of Land
Land itself
 Sites required for factories, offices, shops etc.
Climate
Favourable weather allows growth of certain crops. The
amount of daylight impacts on the length of the
working day. Solar/wind energy.
A suitable climate is required for the operation of a
successful tourist industry e.g: __________________
Economic Characteristics of land
Land is fixed in supply
There is a limited amount of resources provided by
nature.
The supply of land of land is perfectly inelastic.
If demand for land increase supply cannot increase
therefore it is fixed. An increase in demand for land
will increase the price.
Land is fixed in supply
 Perfectly inelastic supply
 Occurs when the supply of a product cannot be
changed in the short run, no matter what the price is.
 Example Supply of land, seating capacity of a stadium
Now its your turn!!
 On your own
 Using Mini whiteboards
 Illustrate the graph for land in fixed supply (perfectly
inelastic)
 You have 3 minutes to do this
Economic Characteristics of land
Land has no cost of production
Land is provided by nature and hence has no costs of
production.
Natural resources e.g. land, gas and oil are resources
that occur naturally and so cost actually nothing to
produce.
Economic Characteristics of land
All income from land is economic rent
Land has no costs of production i.e. its supply price is
zero
Economic rent is the payment any factor of production
in excess of its supply price.
As the supply price of land is zero, all of the earnings
of land in excess of this are economic rent.
Economic Characteristics of land
Land is a non-specific factor of production
Land is not confined to one specific use, but rather it
changes e.g. farmland can be used for growing
different crops
Economic Characteristics of land
Lack of Mobility
Land can’t be shifted from one place to another region.
It geographical mobility is nil but its ownership or
value can be transferred.
Economic Characteristics of land
Renewable and Non- renewable
Renewable land: It is naturally replenished, e.g. trees
Non- renewable land: It can be used only once e.g
oil
Demand for Land
The demand for land is derived
 Land itself is not demanded in its own right, but it
is sought for the goods it helps to produce.
Demand for Land
The demand for land depends on its MRP
The rent that will paid for land depends on its
marginal rate of productivity (MRP)
MRP in return is related to the selling price of the
finished good.
Therefore, we can conclude that the selling price of the
good will determine the rent to be paid for the land
23
Rent
As the demand
for land
increases,
rent increases
Rent
S
Supply of land is
fixed therefore
supply curve is a
vertical straight line
D3
P2
P1
D1
D3
P3
D2
D1
As the demand
for land
decreases, rent
decreases
D2
Q
Quantity
Now its your turn!!
 In groups of 3
 Using Paper provided
 Answer the part of the exam question allocated to
your group
 You have 5 minutes to do this
 You must elect a spokesperson, writer and timekeeper
for each group