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Land Economics EC 5120
01) Briefly discuss the characteristics of land as a natural resource and how human interventions
can change the usefulness of land as an input in production of goods and services.
Supply of land is fixed in quantity supply of land cannot be increased or decreased with human
effort. Land is a primary factor of production. Although the total amount of land is fixed, there
are other uses for it. Different types of land can be used for various purposes. There are no
expenses to be incurred in creating land because it already exists. Due to the lack of human labor
involved in its construction, land has no manufacturing costs. The fact that land is heterogeneous
is another significant characteristic. Not all terrain types (grades) are equally productive or
fertile. In actuality, the law of diminishing returns applies to land-based production. With the
supply of land fixed, adding more labor and money will result in a decreasing yield. It also
applies to other circumstances, but only in the short term. Long-term supply increases of other
causes are possible. There is no geographic mobility for land. However, it has occupational
mobility. Land has a broad definition as a factor of production and can take on various forms,
from agricultural land to commercial real estate to the resources available from a particular piece
of land. Natural resources, such as oil and gold, can be extracted and refined for human
consumption from the land. Cultivation of crops on land by farmers increases its value and
utility. While land is typically a necessary component of operations, its significance might
change depending on the industry. For instance, a technological company can simply launch
operations with no land investment. The most major investment for a real estate venture is land,
on the other hand.
2. i) Show in a supply demand diagram an equilibrium for a market for land.

ii) Show in a diagram how marginal cost of a unit output changes with time.
3. Explain how different characteristics of property rights can be used in using public lands for
the benefit of the society.
Public land is a public good. Public goods have two key characteristics. They are non-excludable
and non-rival. Non excludable means that impossible for one user to exclude others from using a
good. Non rivalry means when one person uses a good, it does not prevent others from using it.
Transferability is a property can be transferred by its owner by way of sale, exchange or gift. A
landowner can transfer his land. But a public owned land cannot be transferred. Enforceability is
that property rights should be secure from seizure or encroachment by others. As a public land is
a public good it is non-excludable and non-rival. Benefits of Public lands can be categorized as
ecological benefits, economic benefits, social benefits and cultural benefits. Ecological benefits
like air and water filtration, flora and fauna habitats, increase biodiversity and land cover.
Economic benefits are providing increase recreation activities and provide natural resources such
as timber, minerals, and fossil fuels. Cultural benefits like history and social benefits such as
recreational benefits etc. As public land is a public good free rider problem will be an issue.
Public goods problems are often closely related to the "free-rider" problem, in which people not
paying for the good may continue to access it. Thus, the good may be under-produced, overused
or degraded.
4. State the definition of public policy. What do you mean by tools in public policy? Describe
different policy tools used by governments.
Public policy is best described as the broad area of government laws, regulations, court
decisions, and local ordinances. Governments employ a number of tools such as legislation,
sanctions, regulations, taxes and subsidies in order to change behavior in the interest of the
public. Regulation refers to a set of laws for identifying what is permissible and impermissible
for individuals, firms and government agencies. It is accompanied with sanctions and rewards.
Thus, its strength lies in the way it restricts behavior that threatens public health, safety, welfare
or well‐being. Legislation, the process by which municipal, state, or federal legislatures draft and
adopt laws. It is occasionally used to refer to municipal ordinances as well as the rules and
regulations issued by administrative bodies while they were performing their designated
legislative duties. Legislation entails participation from the executive branch in addition to action
by a legislative body. The governments set taxes on producers and consumers. Some of these
expenses will be passed on to consumers in the form of higher prices. Similar to taxes on
producers, consumer taxes will eventually lower amount sought and producer surplus. When
utilized to fix market flaws, or when competitive, private markets fail to provide outcomes that
are socially desirable, subsidies can be an effective tool for policymakers.
5. Discuss the reasons for different objectives for intervention and realized outcomes for land
policies in Sri Lanka, since 1815.
The goal of the monarchs, who served as the country's rulers throughout the pre-colonial era, was
to make the nation food self-sufficient, and a hydraulic civilization was encouraged. In order to
distribute land for agriculture among numerous tribes under diverse tenure systems, a semi-
feudal organization was in existence. Aiming to gain foreign currency (in the form of gold and
silver) during the colonial era, commercial cultivation of spices, coffee, tea, rubber, and coconuts
was encouraged. Regulations were created to declare all uncultivated lands and waste grounds as
royal lands since the country's land tenure system did not make it easy to acquire lands for
commercial agriculture. Domestic agriculture was ignored in favor of export agriculture. The
amount of rice produced domestically was insufficient to satisfy local demand. Rice had to be
imported as a result. Plans for land colonization were started in order to aid this transition. This
is why the LDO of 1935 was passed. During 1970s, the government took Marxist view of
Economic Development. A maximum ceiling of 50 acres was imposed for single ownership of
land. Remaining lands was appropriated to reduce the income disparity among people and to
even out asset distribution. Large plantations were nationalized and management of the
plantations was given out to two plantation companies holding the ownership with the state.
Land were alienated in small plot sizes keeping ownership with the state.

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Land Economics EC 5120

2. i) Show in a supply demand diagram an equilibrium for a market for land.

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