According to this article: ‘By the 1970s some seers, noting the falling cost and

Question

According to this article:

‘By the 1970s some seers, noting the falling cost and increasing power of information technology, convinced themselves that the textbooks were anticipating the way of the world: land and location would soon cease to matter in real life, too. Instead, concern over land has come roaring back. The issue is not overall scarcity, but scarcity in specific places—the cities responsible for a disproportionate amount of the world’s output. The high price of land in these places is in part an unavoidable concomitant of success.... Supply chains leap borders and oceans; calls to customer services can be answered a continent away. But if distance has died, location has not.... Top cities became hotbeds of innovative activity against which other places could not easily compete. The people clustered together boosted each others’ employment opportunities and potential income. From Bangalore to Austin, Milan to Paris, land became a scarce and precious resource as a result; the economic potential of a hectare of a rural Kentucky county is dramatically lower than that of a hectare in Silicon Valley’s Santa Clara county. And there is only so much of Santa Clara to go around.... There are ways to address this with policy.... Governments could aim specific assistance at those harmed by dense development.... Or they could heed the advice of Henry George, an American follower of Ricardo who in the 1880s made the case for a land-value tax. It has many theoretical virtues. Most taxes dampen, distort or displace economic activity by changing incentives on the margins. But a land tax cannot reduce the supply of land, and it would stimulate economic activity by penalising those whose land is unproductive....’

Q: According to the article, what has happened to the demand and supply of land in recent years? Has there been a shift in the demand curve? Has there been a shift in the supply curve? What has happened to the value of land over time? Explain using the demand/supply model

Explanation / Answer

As per the article there is no change in the supply of the properties in business centres around the world even if the prices of the properties rises to a very high amount and because almost all companies want their headquarters in these places therefore the supply and demand curve will remain consistent for these properties and will be perfectly inelastic. That means we will have perfectly inelastic curve for demand as well as for supply because we can’t have more land in those places and even if the prices of the properties rises to sky then also companies will buy properties in those areas. And since there is no increase in supply and no decrease in demand therfore the prices of properties will rise over time in these areas.

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