A . If the government places a tax on land users, what will happen to the quantity of land supplied, if the supply of land is costless? What will happen to land rent? b. How will your answers to Part a . change if there are differential rents in the absence of the government tax?
a . Although the tax will reduce the demand for land, the quantity of land supplied will not change
because the supply of land curve is vertical. The land rent received by landowners, however, will fall
by the amount of the tax.
b. In this case, the demand for land will fall, and some land may be taken out of use. The land rent
received by landowners, again, will fall by the amount of the tax.
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