ABSTRACT
The economic process underlying the visible patterns of land use incorporates a multitude of factors forming a composite of land use decisions. This chapter examines the market and the dynamics of market adjustments. The most familiar representation of an economic market is the conventional notion of supply and demand, relating quantity demanded by consumers and quantity supplied by producers to price or value of the particular good or service in question. Land has economic value because it can contribute to the production process. Land value is closely related to the economist's concept of economic rent—a surplus of returns over cost. Dynamics affecting land use will undoubtedly impact virtually all alternative uses. Externalities represent costs or benefits or both associated with land uses that are not automatically captured in the capitalization process. In addition to the classical function of raising revenues, tax policy is frequently advocated as a mechanism for land use control.
