Land is a Natural Factor of Production - Features of Land

Land is a Natural & Primary Factor of Production ↓

Land is not created by mankind but it is a gift of nature. So, it is called as natural factor of production. It is also called as original or primary factor of production. Normally, land means surface of earth. But in economics, land has a wider meaning. Take a good look at the following picture :-

Image Credits © Amanda Platt.

From the above picture it is clear that land includes earth's surface and resources above and below the surface of the earth. It includes following natural resources :-

1. On the surface (e.g. soil, agricultural land, etc.)
2. Below the surface (e.g. mineral resources, rocks, ground water, etc.)
3. Above the surface (e.g. climate, rain, space monitoring, etc.)

Peculiarities / Characterisitcs / Features of Land ↓

1. Land is a free gift of nature

Land is a free gift of nature to mankind. It is not a man-made factor but is a natural factor.

2. Land is a primary factor of production

Though all factors are required for production, land puts foundation for production process. Starting point of production process is an acquisition of land. So, it is a primary factor.

3. Land has perfectly inelastic supply

From society's point of view, supply of land is perfectly inelastic i.e. fixed in quantity. Neither it can be increased nor decreased. Simply, you can not change size of the earth. But from individual point of view, its supply is relatively elastic.

4. Land has gradability

Land varies from region to region on the basis of fertility. Some land are more fertile and some are not at all. So, fertility wise, grading of land is possible. So, in this way, land has gradability.

5. Land is a passive factor

Land itself doesn't produce anything alone. It is a passive factor. It needs help of Labour, Capital, Entrepreneur, etc. Like labour and entrepreneur, it doesn't work on its own initiative. So it is a passive factor.

6. Land may have diminishing returns

Here, return means quantity of crops. By using fertility of land with the help of capital and labour continuously, returns gets diminished because of reduction in fertility.

7. Land has a derived demand

Demand for agricultural goods is a direct demand and for producing such goods, land is indirectly demanded. So, as a factor, land has a derived demand from consumer's point of view.

8. Land has no social cost

Land is a gift of nature to society. It is already in existence. Land is no created by society by putting any efforts and paying any price. So, for society, supply price of land is zero.

But, because for the purchase of land or for its improvement, individual has to pay certain price, so its supply price for individual is not zero.

9. Land is a indestructible factor

Land is durable and not perishable. It has a long life. No one can destroy the land. The power of land is permanent and indestructible. Its fertility can be destroyed as well as restored by human efforts.

10. Land is perfectly immobile

Mobility means ability to move. Movement of land from one place to another is impossible. Thus, physically, land is perfectly immobile. But it has certain occupational mobility because it can be used for variety of occupations, like agricultural use or for construction of houses.

11. Land has a site or location value

Every piece of land has its certain site or location value. Such value depends upon quality of its location. Land near to sources of raw materials and other infrastructure facilities always enjoy high site value. Here accessibility of land plays an important role.

12. Land earns rent as a reward for its use

Rent is a reward for the use of land. Classical economists like Ricardo connected rent with fertility of land whereas modern economists like Marshall and Javons stated that land earns rent because of its scarcity.