Economics Essay Example | Topics and Well Written Essays - 750 words - 14

Economics - Essay Example pends on government regulations and zoning authorities which may mark land as being in industrial, commercial or residential zones which may reduce the varieties in which land could be used. For example, prime property sites in the middle of a bustling city may be zoned for parks or public recreational areas and no matter how much developers want to use that land for create high rise apartments or offices, the land remains free of buildings (Cem.ac.uk, 2008). In fact, even when demand changes to seek more industrial land in or around a city or more residential sites, government policy may be slow to react to the demand which could significantly increase the price of land currently zoned to be industrial or residential. The problem of zoning or rezoning is only multiplied when we consider how existing buildings no rezoned land may create problems for developers especially if the buildings are in congested areas or have significant historical or cultural importance (Cem.ac.uk, 2008). At the same time, there is no cost of production associated with land itself. This is because the primary determinant of what value can be derived from land comes from the best use land can be put to. However, owning a piece of land in a certain area gives the landowners the power of monopoly since they are the single owners of the site. New production of land with the same specifications in the same space is impossible therefore they can charge monopoly prices if they so desire (Cem.ac.uk, 2008). The monopoly ownership makes land an appreciating asset of course things such as an oil spill near a beach can significantly decrease the value of beachfront property but there is little chance of new land being created in significant numbers. This also encourages land hoarding as speculative ownership of land may lead to profits when properly zoned land becomes scarce in a given region (Cem.ac.uk, 2008). In this manner, speculators and those who are hoarding land may be quick to offer the