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Land in Economics: Notes, Characteristics, Functions, Importance and Productivity


In this article we will discuss about:- 1. Meaning and Definition of Land 2. Characteristics of Land 3. Functions 4. Importance 5. Productivity.

Notes on Land:

The term ‘land’ generally refers to the surface of the earth. But in economics, it includes all that, which is available free of cost from ‘nature’ as a gift to human beings. Land stands for all nature, living and non-living which are used by man in production.

Even though land is passive factor and it does not possess any ability to produce on its own, it is an important agent of production. Modern economists consider land as a specific factor of production, which can be put, not only to a specific purpose but to several other uses.


Land has been defined by various scholars, as:

“By land is meant not merely land in the strict sense of the word, but whole of the materials and forces which nature gives freely for man’s aid in land, water, in air and light and heat.”


“Land is a specific factor or that it is the specific element in a factor or again that it is the specific aspect of a thing.” —PROF. f. K. MEHTA


Thus, we can say, land includes:

i. Surface of the earth like plains, plateaus, mountains, etc.

ii. Sea, rivers, ponds, etc.

iii. Air, light, etc.


iv. Oil, coal, natural gas, etc.

v. Silver, gold and other metals and minerals.

Characteristics of Land:

‘Land’ has specific characteristics, which distinguish it from other factors of production.

The main characteristics of land are:

1. Free Gift of Nature:

Basically, land is available free of cost from the nature. In the initial stages, man paid no price for the land acquired by him. However, to improve the usefulness or fertility of land or to make some improvements over land, some expenditure is to be incurred, but as such, it is available at no cost from nature. Man has to make efforts in order to acquire other factors of production.

But to acquire land no human efforts are needed. Land is not the outcome of human labor. Rather, it existed even long before the evolution of man.

2. Supply of Land is Fixed:

Supply of land is fixed in quantity. It means supply of land cannot be increased or decreased like other factors of production. Although for an individual, supply of land may be flexible, but at macro level, the overall supply of land is fixed. However, only effective supply of land can be increased by making an intensive use of land.


3. Difference in Fertility:

All lands are not equally fertile. Different patches of land have different degrees of fertility. Some locations are very fertile and have very good agricultural productivity, whereas some patches are totally barren and nothing can be grown there. Similarly, the degree of richness of mineral wealth varies from place to place, making the land more useful or less useful from economic point of view.

4. Indestructibility of Land:

Land is an indestructible factor of production. Man can change only the shape of a particular location and composition of its elements, but as such land cannot be destroyed. It can either be converted into a garden or to a forest or to an artificial lake. However, some parts of land get eroded due to natural factors, but that is immaterial because overall availability of land does not change.


5. Immobility:

Unlike other factors, land is not physically mobile. It is an immobile factor of production, as it cannot be shifted from one place to another. It lacks geographical mobility. Some economists, however, describe land as a mobile factor on the argument that it can be put to several uses.

6. Land is a Primary Factor of Production:

In any kind of production process, we have to start with land. For example, in industries it helps to provide raw materials, and in agriculture, crops are produced on land.


7. Passive Factor of Production:

Land is a passive factor of production, because it cannot produce anything on its own. Human element and capital inputs are required to be combined in an appropriate manner with land in order to obtain yields from it.

8. Effect of Laws of Returns:

Since land is a fixed factor of production, the laws of returns are more effectively applicable on it. Increased use of capital and labor on a particular plot of land leads to an increase in crop production at a diminishing rate.


9. Alternative Uses of Land:

Land is used for alternative purposes like cultivation, dairy or poultry farms, sheep rearing, building, etc. The use of land for any particular purpose depends not only on the return from that particular use, but also the returns from alternative uses.

10. Land is Heterogeneous:

Land like other factors of production differs from another in respect of location, fertility, nature and productivity. Two pieces of land are not exactly the same.

Functions of Land:

The primary occupations are agriculture, dairying, animal husbandry and poultry farming. These essential activities are not possible without land. Manufacturing industries depend totally on land for raw materials. Land provides minerals, metals and many raw materials like cotton, jute and sugarcane which are used to create other essential products.

1. Primary Occupation:

All primary occupations like agriculture, animal husbandry, poultry farming, fisheries, dairying, forestry, etc. are land oriented and are also known as primary activities.

2. Basis of Industries:

Manufacturing industries get diverse type of raw materials from land, namely, raw cotton, sugarcane, raw jute, coal, minerals and metals, etc.

3. Basis of Power:

All sources of power, i.e. hydro-electricity, thermal power, diesel, coal, oil, etc., emanate from land.

4. Basis of Employment:

In underdeveloped countries nearly two-third of population is engaged in agriculture and other primary activities. Agriculture, forests, mines, etc., provide lot of employment opportunities to rising population.

5. Basis of Transport:

All the important modes of transport, i.e., road, railways, water­ways and air-ways are mainly based on surface of the land, rivers, oceans and air, which are all constituents of land.

6. Basis of Trade:

Products of land are traded within the country and also form part of foreign trade. Products like food grains, minerals, metals, timber, leather, hides and skins, wool, tea, jute, petroleum, milk, butter, etc., are tradable products of land.

7. Basis of Economic Growth:

A natural resource, that is land, play an important role in the economic development of a country. Prosperity of gulf countries lies in the oil-wells found there. Economic development of South Africa is mainly due to its fertile land, irrigation and power facilities. All these are different facets of land.

8. Basis of Life:

We depend on land for our subsistence, residence and other necessities of life. Land provides food, raw materials and shelter.

Importance of Land:

Land is considered the primary factor of production. Land is rich in coal, water and petroleum, which are used for generating power. Land is required to construct factories and industries to carry out the production process. Land is of great importance to mankind. A nation’s economic wealth is directly related to the richness of its natural resources.

In spite of rich natural resources, a country may remain economically backward due to some unfavorable factors on account of which the natural sources are either under­utilized or not utilized. On the other hand, if a country does not have rich natural resources, it is comparatively much more difficult to make it prosperous.

The quality and the quantity of agricultural wealth of a country depend on the type of soil, climate, rainfall and water resources. The industrial progress and prosperity of a nation depends on mineral resources. The presence of rich coal mines, waterfalls or petroleum wells directly help in the generation of electric power, which is a key factor for industrial development.

The localization of industries invariably depends on proximity of power and raw materials. All these basic elements are provided by nature.

An example can emphasize the importance of land. In recent past, in spite of having enough capital, labor and efficient organization, TATA Motors were unable to start their Nano car project at Singur, West Bengal, due to the dispute over land possession.

In short, the importance of land is evident from the following points:

1. Land determines agricultural production.

2. The industrial progress and prosperity of a country depends on availability of mineral resources, i.e., land.

3. Land determines total production of a country.

4. Land influences the economic growth of a country.

5. Land maintains ecological balance.

6. Land directly or indirectly fulfills the basic needs of the people.

7. Trade is influenced by land.

Therefore, all economic aspects, i.e., agriculture, industry and trade are influenced by natural resources, referred by economists as ‘Land’.

Productivity of Land:

Productivity of land refers to extent of efficiency. The productivity of land can be expressed by following measures:

1. Average Productivity of Land:

Average productivity of land is defined as the output obtained from land divided by area of that piece of land.

2. Marginal Productivity of Land:

Marginal productivity means the increase in output obtained from land due to increase in one unit of land, but the other inputs are kept constant.

Factors Affecting Productivity of Land:

The factors affecting the productivity of land are discussed below:

1. Fertility of Land:

The productivity of land is determined by its natural qualities and its fertility. A flat and leveled land is comparatively more productive than an undulating one. The rich soil is more fertile and productive. However, the agricultural productivity can be improved by proper and extensive use of manure and fertilizers along with adoption of mechanized methods.

2. Proper Use of Land:

The productivity of ‘land’ is directly related to its proper utilization. For example, a piece of land situated in the heart of city is more suitable for construction of a house or a market place. If this piece of land is put for farming or agricultural use, its productivity will almost be negligible.

3. Location of Land:

The location of ‘land’ affects its productivity to a great extent. For example, the location of land near the market or bus station will result in economy of transportation charges and overall productivity from this point of view will naturally be higher. Similarly, for better agricultural productivity, its location near water resources is desirable.

4. Improvements done on Land by Increasing Irrigation Potential:

Permanent improvements done on land by generating artificial means of irrigation, i.e., wells, tube wells, canals, tank, etc., help to keep the water supply regular and have a positive effect on the productivity of land.

5. Ability of Organizer:

Land is a passive factor of production and so it is essential to combine it with other active factors, in correct proportion, to achieve the optimum productivity. In order to accomplish it, an able organizer is a must, who can successfully handle and combine the passive and the active factors in right proportion so as to achieve greater productivity. The competence and ability of an organizer directly affect the productivity of land.

6. Land Ownership Laws:

The ‘land ownership laws’ prevailing in a country have a significant influence on the productivity of land’. When a full ownership is conferred, the owner takes more interest in its development. For example, a cultivator possessing full ownership rights on land does more hard work and the productivity automatically improves.

But, poor farmers work as tenants on the lands of large farmers. Insecurity of tenancy rights may cause eviction of poor tenancy farmers which make them uninterested to improve land productivity.

7. Availability of Efficient Labor:

The productivity of land depends on the availability of efficient labor as land alone cannot produce anything without the efficient labor. If the labor is efficient, trained and capable to adopt modern techniques; only then he can make the proper use of land.

8. Improved Techniques of Production:

New inventions, modern and scientific methods of production like using high yielding varieties of seeds, manure, etc., have increased the productivity of land. Uses of modern machines in mining have also increased the production of various minerals in India.

9. Availability of Capital:

Capital is the fundamental factor that affects the productivity of land. The productivity of land can be maximized with the help of improved seeds, chemical fertilizers and machines. To fulfill all these requirements, sufficient capital should be available.

10. Government Policy:

The productivity of land is affected by the government policy regarding agriculture. Agricultural productivity starts increasing when the government adopts a proper agricultural policy and provides required assistance to farmers. On the other hand, the state’s negligence towards agriculture is regarded as one of the main causes of agricultural backwardness. This results in low agricultural productivity.

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