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Landrenttheory

Land rent theory examines how the price of urban land is determined and how it influences land use patterns. There are three core concepts: rent, which is the profit from accessibility advantages; rent gradients, which show declining rent with distance from a center; and bid rent curves, which depict the maximum rent different activities will pay at various locations. The theory illustrates that retail has the highest rent near the center due to its accessibility needs, while rent declines exponentially with distance as available land increases.

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152 views1 page

Landrenttheory

Land rent theory examines how the price of urban land is determined and how it influences land use patterns. There are three core concepts: rent, which is the profit from accessibility advantages; rent gradients, which show declining rent with distance from a center; and bid rent curves, which depict the maximum rent different activities will pay at various locations. The theory illustrates that retail has the highest rent near the center due to its accessibility needs, while rent declines exponentially with distance as available land increases.

Uploaded by

api-314084641
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Land Rent Theory

In a market economy, most of the urban land can be freely sold or


purchased. Thus land economics are concerned about how the price of
urban land is fixed and how this price will influence the nature, pattern and
distribution of urban land uses. Three concepts are at the core of the land
rent theory:

Rent. A surplus (profit) resulting from some advantage such as


capitalization and accessibility. The rent is the highest for retail
because this activity is closely related to accessibility.
Rent gradient. A representation of the decline in rent with distance
from a center. This gradient is related to the marginal cost of
distance for each activity, which is how distance influences its bidding
rent. The friction of space has an important impact on the rent
gradient because with no friction all locations would be perfect
locations. Retailing is the activity having the highest marginal cost,
while single family housing have the lowest marginal cost.
Bid rent curve function. A set of combinations of land prices and
distances among which the individual (or firm) is indifferent. It
describes prices that the household (firm) would be willing to pay at
varying locations in order to achieve a given level of satisfaction
(utility/ profits). The activity having the highest bid rent at one point is
theoretically the activity that will occupy this location.
The above figure illustrates the basic principles of the land rent theory. It
assumes a center which represents a desirable location with a high level of
accessibility. The closest area, within a radius of 1 km, has about 3.14 square
kilometers of surface (S=D2). Under such circumstances, the rent is a
function of the availability of land, which can be expressed in a simple
fashion as 1/S. As we move away from the center the rent drops
substantially since the amount of available land increases exponentially.

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