Economics of Land and Water Resources

The relationship between distance from a central location and the maximum net benefit society receives from a particular type of land use.

A type of land use that prioritizes housing and human settlements.

Different ways land can be used, like for housing, agriculture, or wilderness.

The overall gain from a particular land use.

Large uncultivated land left undisturbed.

Determining the most suitable use of land based on its location relative to economic activities.

Areas best suited to building houses, given output per worker is higher than alternative uses like agriculture or wilderness.

Land use for farming, between specific distances in output from residential development and wilderness.

Output per worker. A measure of the productivity of labor.

Change in output when one more worker is added. (Change in output / Change in input)

Profit gained from using the land, calculated as the difference between total revenue and total costs.

The number of workers or amount of labor used.

As you add more of one input (like labor) to a fixed input (like land), eventually the additional output (marginal product) starts declining.

The landowner's goal is to find the number of workers that generates the biggest difference between total revenue (TR) and total cost (TC), leading to maximum profit or land rent.

Land rent is maximized when the marginal product (MP) of labor equals the price of labor (wage).

Extending the model to include two plots of land (A and B) with different qualities, each plot will have its own marginal product (MPA and MPB).

To maximize profit, the marginal value product (MVP) of labor on each plot needs to equal the wage rate. This means MPA * PA = wage and MPB * PB = wage.

If MPA > MPB, the landowner will shift labor to Plot A because it's more productive. This continues until MPA = MPB.

Rent is maximized when MPA = MPB and both are equal to the wage rate. This represents the optimal allocation of labor between the two plots.

The point where MPA = MPB, indicated as point X, shows the ideal amount of labor (NA and NB) allocated to each plot to maximize rent.

The point where a landowner maximizes their rent by employing labor on different plots of land until the marginal product of labor equals the wage.

The least productive plot of land, which receives no rent because its marginal product is lower than the wage.

A land resource exclusively owned by an individual, allowing them to control access and maximize rent.

A land resource where no single individual owns it and anyone can freely use it, resulting in shared benefits and potential over-exploitation.

In open access, the wage tends to decrease toward the market wage (W) because more people are enticed to work the land due to initial higher wages.

The optimal amount of labor in private property, where the marginal product equals the wage.

The optimal amount of labor in open access, where the average product equals the wage, preventing additional workers from receiving less than the market wage.

In open access, the rent is shared among the workers because there is no single landowner to maximize it.

The loss of economic rent due to overexploitation of a resource under open access.

The process of distributing a limited water supply among different users.

A horizontal line showing that the water supplier can provide any amount of water at a constant price.

Distributing water to maximize societal welfare, satisfying both urban and rural needs.

The benefit consumers enjoy by paying less than what they're willing to pay for a good.

Achieving the best possible outcome for society, considering everyone's benefits.

Shows the amount of water people want to buy at different prices.

When anyone can freely use water without restrictions, leading to overconsumption and depletion.

Where ownership of water resources is defined, leading to more efficient use as owners have incentives to conserve and profit.

The amount of water used where the benefits of using one more unit equal the costs.

A system with different prices for water based on consumer income, aiming to ensure access for low-income groups.

The reduction in overall well-being due to inefficient resource allocation.

The extra benefit consumers receive from buying a product at a price lower than what they are willing to pay.

The total demand for water by all consumers in the market.

The demand for water specifically from people with lower incomes.