Land is defined in economics as a free gift of nature.
CHARACTERISTICS OF LAND
- Land is a gift of nature
- Land is geographically immobile
- Land is important in mining and quarrying activities.
- Land is subject to the law of diminishing returns
- The reward for land is rent
IMPORTANCE OF LAND
- It provides areas when agricultural activities can be carried
- It provides areas for forestry and wild- life resources
- Land is important in mining and quarrying activities
- Land is important in production activity because it provides the sites and materials for production purposes. It is important in building and construction
- Bodies of water such as rivers, lakes and seas, which are part of land are used for transport purposes.
LAW OF DIMINISHING RETURNS OR VARIABLE PROPORTION
This law refers to a short run production situation. The law of diminishing returns state that ‘as more of the variable factor is added to other factors which are constant, ontput will eventually increase at a decreasing rate’.
According to the hypothesis of diminishing returns, if increasing quantities of a variable factor are appied to given units of fixed factors, output might increase at first but a time will come when each additional unit of variable factor will add less to total output than previous units.
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Diminishing returns set in when more of labour is added to fixed factors ( land and capital). A good example can be found in the agricultural sector. When more labour is employed to work on land, total output will increase up to a point when any addition of labour will result in increase in output at a decreasing rate.
The law of Diminishing returns follows three stages, these are:
- Increasing returns
- Constant returns
- Decreasing returns
Example
| FIXED INPUT | VARIABLE INPUT LAB | TOTAL OUTPUT | AVERAGE OUTPUT | MARGINAL OUTPUT |
| 2 | 1 | 5 | 5 | —— |
| 2 | 2 | 14 | 7 | 9 |
| 2 | 3 | 25 | 8.3 | 11 |
| 2 | 4 | 32 | 8 | 7 |
| 2 | 5 | 37 | 7.5 | 5 |
| 2 | 6 | 42 | 7 | 5 |
| 2 | 7 | 41 | 5.8 | -1 |
| 2 | 8 | 35 | 4.3 | -6 |
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