DEFINITION :” Land does not mean   only surface land or soil but it means everything above the surface on the surface and below the surface of the earth given to us by nature.”

According to Dr.Alfred Marshall, “By land we not merely mean land in the strict sense of the word but whole of materials and forces which nature gives freely to man’s aid in land, water, in air, light and heat.”

According to Ricardo, “Land is the original and indestructible power of the soil.” In reality however it is difficult to distinguish between original from manmade powers. e.g. In a particular farm land we want to sort out between the natural quality soil and quality changed due to farmers’ efforts.


Importance of land:

Land as a factor of production is very important because anything that we use can be ultimately traced to land. Therefore, land is the original source of all wealth. The economic prosperity of a country is closely linked with the richness of her natural resources. It is generally said that a country is what the nature has made it. Therefore, if a country is rich in its natural resources and it exploits the other factors of production properly, it would become a rich and prosperous country. The quality and quantity of agricultural wealth of a country depends on the nature of the soil, climate, rainfall, etc. and agricultural products from the basis of all industry and trade. Therefore, industrial prosperity depends on agricultural prosperity. Means of transport largely depend on economy of the country.

Land is important in shaping the life occupations and standards of living of a community. Original source of all material  wealth, natural resources – prosperity, agricultural productivity, production of food, national prosperity.


Peculiarities or characteristics of land:

1. Land is a free gift of nature: Man cannot produce land. We have to accept it as it is given by nature, work on it, modify and improve it to produce goods and services. It has no cost of production and its availability depends on the nature and not on prices like other factors of production.

2. Land has no cost of production – Since land is a free gift of nature it has no cost of production from the society’s point of view. Therefore all that it produces is a surplus. However from the individual’s point of view land may not be free. We pay for it although it is a free gift of nature because demand for it is greater than supply.

3. Land is limited/fixed in supply (perfectly inelastic) : Supply of land in the world is fixed. It is said that the supply of land changes with the change in technique but other factors like climate, location, etc. remain unchanged. Efforts have been made to increase supply of land through reclaimation and sometimes land may be lost due to erosion. The changes in supply of land are so insignificant /negligible that they may be overlooked / ignored. Therefore, total supply of land cannot be increased or decreased even in a long term period.

4. Land is a heterogeneous factor – Fertility, productivity and quality of land differes from land to land and region to region due to differences in climate, location, soil and nature of land [sandy, rocky, dry, alluvial etc].

5. Land is gradable – Land is a heterogeneous factor due to differences in climate location soil and nature of land (sandy rocky or clayey). Therefore it may be graded according to it’s fertility, productivity and quality. (Human efforts can change the productivity).

6. Land is permanent – Unlike other factors of production land is indestructible. (labourer dies or machines wear out). Even if the land is destroyed eg by atom energy, it regains its power after some time.

7. Land is the least mobile factor – Land cannot be moved physically from one place to another i.e. it lacks geographical mobility. It is mobile in the sense that it can be put to alternative uses. It possess ‘use / occupational

mobility’ e.g. It may be used as a playground, farm, pastures, for industry, houses etc. If a piece of land is suitable for one crop only then it is occupationally immobile. Compared to other factors of production land is the least mobile factor of production.

8. Land is subject to the law of diminishing returns – ie as more and more doses of labour and capital are applied to the same piece of land the total output increases but at a diminishing rate therefore land is subject to the law of diminishing returns.

9. Land is a passive factor of production – It cannot produce goods by itself and it is only when labour and capital is applied to it ie when it is used by man. production from land s possible.

10. Land has a derived demand – Demand for land originates in the demand for some other commodity eg the demand for agricultural land is derived in the demand for agricultural commodities.

11. Land has a composite demand – Land has alternative uses. It is jointly demanded with the other factors of production therefore it has a joint or composite demand.

12. Rent and royalty- is the reward or price for the use of land.


Productivity of land: can be interpreted in two ways.

1. In the absolute sense: “other things (inputs and size of land) being constant, the land which produces more is more productive.” i.e. physical productivity. e.g. A & B are given one hector of land each and A produces 50 units on his land and B produces 30 units then A’s land is superior to B’s land.

Relative terms:” other things (inputs and size of land) being constant, the land which yields more is more productive.” i.e. in relation to cost of production e.g. price in the market is Rs. 100 per quintal. Cost of production per quintal is Rs.80 on A’s farm and Rs. 40 on B’s farm Therefore, A’s farm is superior to that of B’s.

Factors influencing productivity of and:

1. Natural factors: Location of land, favourable climatic conditions, rich and fertile soil, adequate rainfall, mineral deposits etc. Is available productivity of land is high. (vice versa)

2. Human factors: Efficient human effort can improve productivity of land. e.g. If there is no rainfall, man can make water available through irrigation, use of trained skilled farm labour increases production., crop rotation, Use of capital (e.g. seeds, fertilizers pesticides, etc.) increases production.

3. Situation factor: Geographical location is important in determining the productivity of land. If land in the remote corner of the country away from the market, then it may be uncultivated. Because cost of transport may be high compared to the land near the market though not as rich may be but it is more expensive.

4. Other factors of production: Demand and supply.

Intensive and extensive cultivation:


There are two methods of cultivation in order to produce a large output.

1. Extensive cultivation:

a. Bringing unused and uncultivated land under cultivation.

b. Increase inputs of all factors of production including land i.e. a farmer should cultivate as much as land as he can individually.

c. The method of cultivation is old.

d. Yield per acre is low, but in relation to labour and capital yield is large.


2. Intensive cultivation:

a. Using the same piece of land to increase output.

b. Larger quantity of labour and capital is used. The farmer tries to get maximum output from his land.

c. Output per acre increases but it increases at a diminishing rate.

d. Good for countries which are small in size or where population pressure on land is greater.

Extensive cultivation does not necessarily mean large scale farming.

Intensive cultivation does not necessarily mean small scale farming.

Posted in General Economics