Equilibria in the Land and Capital MarketsPanel (a) illustrates equilibrium in the market for land; panel (b) illustrates equilibrium in the market for capital. The supply curve for land is relatively steep, reflecting the high cost of increasing the quantity of productive land. The supply curve for capital, by contrast, is relatively flat, due to the relatively high responsiveness of savings to changes in the rental rate for capital. The equilibrium rental rates for land and capital, as well as the equilibrium quantities transacted, are given by the intersections of the demand and supply curves. In a competitive land market, each unit of land will be paid the equilibrium marginal revenue product of land, R*Land. Likewise, in a competitive capital market, each unit of capital will be paid the equilibrium marginal revenue product of capital, R*Capital.