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Factors Determining the Value of Land as an Endowment
Evaluating Competing Factors on Land Value
Consider a piece of agricultural land. Three distinct events occur simultaneously:
- A new irrigation technology becomes available that could double the land's crop yield.
- Consumer tastes shift away from the crops traditionally grown on this type of land, causing their market price to fall by 50%.
- The local government re-zones the land, permitting its use for high-density residential development, which is in high demand.
Evaluate which of these three events is likely to have the most significant impact on the economic value of the land. Justify your conclusion by comparing the potential effects of each factor.
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Economics
Economy
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
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Analyzing the Impact of Zoning on Land Value
A large plot of rural land has historically been used to grow wheat. A new agricultural technology makes it possible to grow a highly profitable variety of corn on this land, a crop which was previously unsuitable for the local climate. At the same time, national consumer preferences shift, causing a sharp increase in the market price for this specific type of corn. Assuming there are no legal restrictions preventing the landowner from switching crops, how would these combined changes most likely affect the economic value of the land?
Evaluating Competing Factors on Land Value
Match each scenario describing a change in the economic value of a plot of land with the primary factor driving that change.
Interplay of Technology and Demand on Land Value
If a new local ordinance re-zones a plot of highly productive farmland for residential development only, its economic value is guaranteed to decrease because its potential for generating income from crops is eliminated.
Comparative Analysis of Land Value Determinants
A municipality is assessing how to maximize the economic value of a large, undeveloped plot of land it owns. The land has poor soil quality. Two proposals are being considered:
- Proposal 1: Re-zone the land for high-density commercial development to meet strong, existing demand for office and retail space in the city.
- Proposal 2: Maintain the current agricultural zoning and subsidize a new, experimental soil treatment technology that could make the land suitable for growing a specialty, high-priced crop for which there is a small but growing consumer market.
Which statement presents the most sound economic judgment about the potential impact of these proposals on the land's value?
Synthesizing Determinants of High Land Value
An investor owns a large, remote plot of land with soil suitable only for low-yield cattle grazing. For decades, the land's market value has been very low and stable. Which of the following single events would most plausibly cause the most significant and immediate increase in the economic value of this land?