URSP 2200_Lec 5.pdf - URSP 2200 Urban Economic Studies Lecture 5 Oct 2nd 2019 Chapter 6 Urban Land Rent 2 Introduction to Land Rent Market value amount

URSP 2200_Lec 5.pdf - URSP 2200 Urban Economic Studies...

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Oct 2 nd , 2019 URSP 2200 Urban Economic Studies Lecture 5
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Chapter 6: Urban Land Rent 2
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Introduction to Land Rent 3 Market value: amount paid to take ownership Land rent: periodic payment from user to owner
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Bid Rent for Farm Land Depends on Fertility 4 WTP for hectare of land = Total revenue - non-land costs Competition drives economic profit to zero Leftover principle Bid rent per hectare = WTP divided by lot size
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Bid Rent for Urban Land Depends on Accessibility 5 WTP: Maximum amount for lot large enough for production facility WTP = Total revenue - non-land costs One part of non-land cost is cost of freight to highway Bid rent per hectare = WTP divided by lot size
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6 Δ𝑅 Δ𝑥 = −$10 The slope: the change in the bid rent from a one-unit increase in distance
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Bid Rent for Office Land Depends on Accessibility 7 Office firms gather, process, and distribute information Principle of median location : Travel distance minimized at median location Total travel distance increases at increasing rate as distance to center increases
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8
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Office Bid Rent without Factor Substitution 9 WTP = Total Revenue - non-land costs One part of non-land cost is travel costs of office workers Bid rent per hectare = WTP / size of production site
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10
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Role of Factor Substitution 11 Capital and land are input substitutes in production of office space
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