Urban land rent and use 1

Question 1

how does agricultural land rent vary with fertility?

Answer 1

land rent must compensate for differences in fertility of land
- fertility UP => non-land inputs DOWN => land cost UP

Question 2

what happens if a particular land’s fertility is high but land rent is same?

Answer 2

• demand of location UP
• price & rent of location UP
• cost in location UP

Question 3

Willingness to pay calculation

Answer 3

The amount they are willing to pay is equal to the total revenue minus cost

Question 4

Three spatial equilibrium conditions

Answer 4

• border-households must be indifferent between professions
  => households will be satisfied at both jobs (farmer/clerk) on the border
• if a location provided higher utility than other locations, households want to live there
  => location’s demand UP, location’s housing price UP, location’s utility DOWN
• If a location provided positive profit
  => developer would want to develop there, excess demand for land, landowners will increase price (and opposite for all)

Question 5

housing/non-housing consumption between L1(CBD) and L2(suburbs)

Answer 5

L1:
- high opportunity cost per unit of housing => less housing consumption (more non-housing consumption)
L2:
- low opportunity cost per unit of housing => more housing consumption e.g. cheaper to live in larger house (less non-housing consumption)

• total housing consumption increases with distance from CBD