Factors of Production: LAND


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In today’s class, we will be talking about the Factors of Production: Land. Enjoy the class!

Factors of Production: LAND

Factors of production are resources that are the building blocks of the economy; they are what people use to produce goods and services. Economists divide the factors of production into four categories: landlabourcapital, and entrepreneurship. All the factors of production work together (they work hand in hand).


Land has a broad definition as a factor of production and can take on various forms, from agricultural land to commercial real estate to the resources available from a particular piece of land. Natural resources, such as oil and gold, can be extracted and refined for human consumption from the land. Cultivation of crops on land by farmers increases its value and utility.

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 economics, of course, is an area, but also includes all the gifts of nature like water, air, natural resources etc. Which affect production.

Characteristics of land
  • A 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. 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 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, the land has multiple uses. However, its suitability for all uses is not the same. For instance, we can use a piece of infertile land to set up a factory but not for cultivation and agriculture.


In our next class, we will be talking about Problems and Functions of Farm Manager. We hope you enjoyed the class.

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