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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