A Closer Look at the Law of Rent

Adding a few specific factors can help us to understand how land speculation works. Here is a model that considers the intensive margin as well as the extensive margin.

4 plots
of each
grade
of land

5 units per worker/day;
50 workers
per plot

4 units per worker/day;
40 workers
per plot

3 units per worker/day;
30 workers
per plot

2 units per worker/day;
20 workers
per plot

1 unit per worker/day;
10 workers
per plot

Unemployed
workers:

50

1.

50 x 5

40 x 4

30 x 3

20 x 2

10 x 1

2.

50 x 5

40 x 4

30 x 3

20 x 2

10 x 1

3.

50 x 5

40 x 4

30 x 3

20 x 2

10 x 1

4.

0

0

0

0

0

Totals

workers
employed

150

120

90

60

30

450

wealth
output

750

480

270

120

30

Welfare
cost

1650

infrastructure
cost

200

160

120

80

40

50

650

Totals: Workers employed: 450 | Wealth Output: 1650 | Infrastructure/welfare cost: 650 |