Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

When is land most valuable according to economic principles?

1. When it is easily available to everyone

2. When it is in short supply and in high demand

3. When it has many identical lots

4. When it has a large number of existing homes

The correct answer is: When it is in short supply and in high demand

Land is most valuable when it is in short supply and in high demand due to economic principles of scarcity and competition. When land is scarce—meaning there is little of it available for sale or development—it tends to drive up its value because potential buyers are vying for a limited resource. High demand can stem from various factors, such as population growth, economic development, or strategic location. When many individuals or businesses want access to the same piece of land but cannot all have it, the competitive nature of the market forces prices higher. In contrast, when land is easily available to everyone, its value diminishes because the supply exceeds the demand. Identical lots may also lower individual property value; if there are many similar options, buyers have less reason to pay a premium for any one lot. Lastly, while existing homes on a property can add value, the true impact on land value primarily derives from the underlying economic principles related to supply and demand rather than the presence of homes alone. Thus, the correct answer emphasizes the critical role that scarcity and demand play in determining land value.