Question

Contrast the shapes of the supply curves for financial capital and land.

Answer 1

Supply curve for land will be perfectly inelastic as supply of land is fixed and change in demand of land does not necessarily lead to an increase in the supply cause its quantity is fixed.

Thus on the X axis there is quantity of land whose supply is fixed and on Y axis there is rental per acre. Supply curve is a straight vertical line.

Whereas financial capital is elastic and thus the supply curve is upward sloping with higher amount of capital being sought at a lower interest rate. If interest rates increase than demand for financial capital reduces as less number of firms seek out credit. But the supply increases at higher interest rates.

Thus So is the supply curve.