If for any reason the costs are lowered or demand for the product in- 

 creases, then the net present value increases. Population increases raise the 

 demand for land for both farm and nonfarm use; however, on urban fringes the 

 demand for nonfarm use of the land usually is greater. The farmer would sell 

 his land if the revenue from the sale exceeds the net present value of further 

 cultivation. 



The generalized farm production function is Q = f (L, K, T, C, E) where 

 the quantity of output (Q) is a function of the inputs labor (L), capital (K), 

 land (T), chemical and fertilizers (C) and energy (E). There are many combi- 

 nations of inputs which yield a given level of output. The farmer usually 

 will use the least-cost combination of inputs that yields a given level of 

 output. The farmer also will adjust the combination of inputs as their costs 

 change or as the productivity (technological change) of outputs changes (e.g., 

 more efficient capital). 



Relative prices, expressed as index numbers (Table 10) paid by farmers 

 for selected inputs in 1975-79 demonstrates that real land values have in- 

 creased 53.6% whereas machinery prices have only increased 46.6%, wages have 

 increased 38%, and the cost of fertilizers and chemicals have declined. Total 

 input costs (excluding land value) rose only 37.2% (Greene et al . 1980). This 

 relative increase in the price of land over other inputs accounts for the sub- 

 stitution of these inputs such as labor and machinery for land. These results 

 are consistent with the hypothesis that Florida farmers have substituted 

 labor, capital, and fertilizers for land as the price of land has risen rela- 

 tive to the other input prices. The practice has increased the unit produc- 

 tivity of land. 



Table 10. Index number of prices paid by farmers for production items, inter- 

 est, taxes, and wage rates in the United States for 1075-79 (Green et al . 

 1980). 



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