What economic principle suggests that the supply and demand for land will influence its price?

The principle that indicates how the supply and demand for land will influence its price is best described by location theory. This concept focuses on how the geographical location of a property affects its desirability and market value. In real estate, land that is situated in a prime location, close to amenities or in a high-demand area, will typically have a higher price due to increased demand.

Location theory provides insight into how various factors like accessibility, neighborhood characteristics, and proximity to resources can significantly impact land values. As demand rises for specific locations, prices tend to increase, reflecting the competitive nature of land being a limited resource. This principle effectively captures the dynamics of supply and demand in real estate, making it the most relevant choice in this context.

In contrast, other options address different aspects of economics. The law of supply explains the relationship between price and the quantity of goods that suppliers are willing to sell, while the principle of substitution refers to consumers' willingness to replace one product with another based on relative prices. Economic efficiency deals with resource allocation in a way that maximizes output and minimizes waste, but it does not directly address how location influences land prices. Consequently, location theory is the most accurate choice for illustrating how land prices are determined by supply and demand dynamics.