Econ 366 - Chapter 5

Econ 366 - Chapter 5 - Chapter 5 Introducing Land and Land...

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Chapter 5 Introducing Land and Land Rents into Price Theory
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Introduction Urban areas - places with high population and employment densities Economics – ratios of capital and labor to land are higher in urban areas Tasks of this chapter Incorporate land into production theory To use the theory of production modified by inclusion of land to analyze the particular spatial relationships that characterize urban areas
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Land rent – price of land, land market theory deals with determination of land rents (deals with allocation of scarce land among alternative uses) Land rent: price of services of land for a specific period of time Land price : present or capitalized value of rent that a particular period of land will yield in perpetuity V = R/i
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Assets usually deteriorate with time, but urban land uses do not cause physical deterioration (so stream of services does not decline) Improved land value – price of land with structures on it Unimproved land value =(land value and land rent) price of land without the structures on it. Very difficult to get data on it as there are few transactions with unimproved lands Other ways to improve land - sewerage, drainage, waste disposal –affects market value
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Theory of land rent and land use A. Assumptions 1. input and output markets are perfectly competitive (since imperfection adds no new insights while making
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This note was uploaded on 09/26/2009 for the course ECON 366 taught by Professor Sengupta during the Fall '08 term at USC.

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Econ 366 - Chapter 5 - Chapter 5 Introducing Land and Land...

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