Modern economists have furnished a bc ucr explanation of the rent of land. According to the modern
view. rent is a payment for the use of land. Rent. in this sense. is obviously determined by the demand for and the supply of land. Take first the demand side. Demand tut the Use or Laud.The demand for land is a derived demand. It is derived from the demand for the products of land. If the demand for these products rises or falls. the demand for the use of land will correspondingly rise or fall leading to increase or decrease of rent. For instance. if population of a country increases. the demand for food will increase. resulting in increased demand for land and IISC in its rent. and \ ice-versa. We have seen in a previous chapter (no. J I) that the demand for a factor of production depends on its marginal revenue productivity (or in short marginal productivity). TIle productivity is subject to the law of diminishing marginal productivity. That is why. as in the case of other factors, the demand curves shown in the slope down from the left to the right. Thus. on the side of demand. rent of land is determined by its productivity. not total productivity. but marginal productivity. Supply Side. On the supply side. the supply of land is fixed so far as the community is concerned. although individuals can increase their own supply hy acquiring more land from others or decrease its supply by parting with land. In spite of reclamation projects. the effect of which on the total supply is neg· eligible, the supply of cremains practically fixed. It is a case of perfectly inelastic supply which means that whatever the rent (the rent may rise or fall). the supply remains the same. That is why it IS said that land has no suppy price. In other words. the supply {If land in general is absolutely inelastic and as such its supply is independent of what it cams.