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Chapter 18 – The Land Market
and Natural Resources
Fixed supply of land (to all uses)


The supply
of land to
all uses is
fixed
Owners
receive
economic
rent
Land supply to a given use


The supply of land to a given use is
upward sloping
Land is shifted to its most valuable use
(subject to restrictions in zoning laws,
etc.)
Renewable and nonrenewable
resources


nonrenewable resources (also known as
exhaustible resources) have a finite
supply that is depleted as the resource
is consumed
renewable resources – can be
replenished by producers
Equilibrium price of a
nonrenewable resource
Price of a nonrenewable
resource over time
Price changes over time for
nonrenewable resource




Owner may sell a unit today or sell it later at a higher
price
Owner supplies more today if the expected rate of
price increase is less than the interest rate
 leads to lower price today and higher price later
Owner supplies less today if the expected rate of
price increase exceeds the interest rate
 leads to higher price today and lower price later
In equilibrium – rate of price change = interest rate
Renewable resources