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GEO 106
Abednego Aryee

Chapter 10 Bid Rent Theory Bid rent theory was first p It depends on the weight and value of the commodity It depends whether or not the good is perishable; if it is the more perishable the closer it is to the market. -------------------------------------------------------------------------------------------------------------------------------- ---------- Bid Rent Theory All later ideas followed Von Thunen’s basic premise: A particular piece of land will be used by that activity that can pay the highest net rent. The idea is that every piece of land will get used by or sold to the highest and best use, where Highest is measured in terms of how much “rent” (or profit) it can generate, and… Best in terms of which use (or product) can “best” take advantage of the site’s attributes. -------------------------------------------------------------------------------------------------------------------------------- ---------- Bid Rent Theory Von Thumen was very much ahead of his time in his ideas, including the fact that he used a ‘modeling’ approach in his analysis. That is he assumed that: -his landscape was an “isolated state” or what we would today call a closed economic system. -it was an isotropic plain (i.e no difference in fertility transportation, topography, etc) -all crops had a uniform production function (i.e. they were all produced the most efficient way) There was a single central market place. -farmers and buyers were ‘economic person’ Given these conditions, the only thing left to vary was transportation costs – what would later be called the friction of distance. -------------------------------------------------------------------------------------------------------------------------------- ---------- Bid Rent Curves – Single Crop X – axis (Distance from the market) Y – axis [rent (or profit) in $ per unit produced] (x = 0) Net rent earned if the crop were grown at the market – i.e. no transportation costs Net rent earned if the crop were grown at location x – i.e. with transport costs from x to the market accounted for. (y = 0) Distance at which production stops because net rent earned is 0 -------------------------------------------------------------------------------------------------------------------------------- ---------- Bid Rent Model R = Y(p-c)=Ytd Where: - R is the net location rent generated per unit of land - y is the yield or output per unit of land - D is the distance to the market - P is the market price per unit and of output - C is the production cost per unit of output - T is the transportation cost per unit of output per unit of distance -------------------------------------------------------------------------------------------------------------------------------- ---------- Bid Rent Curves – multiple crops And these margins of cultivation create the zonai pattern -------------------------------------------------------------------------------------------------------------------------------- ---------- Higher order goods are usually more expensive than lower order goods. Higher order goods could be headquarters of companies. Also highly specialized businesses would be found in big cities. (e.g. surgeons) Lower order goods would be not as highly specialized businesses. (e.g. doctors) -------------------------------------------------------------------------------------------------------------------------------- ---------- Urban Land Rent Theory Urban land rent theory works on the very same principles as bid rent theory, except it is applied to urban land use patters. Transportation costs in this case are interpreted differently central locations are seen to be desirable because they are the point on the landscape that is closest to every other point. Since shipping anything is seen as a cost then the most accessible location have the lowest transportation cost associated with it. Whether the
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