Question

1. Explain the land rent gradients for four activities: manufacturing, agriculture, offices and housing and how – in a simple city model – land is allocated to one or the other use.

Answer 1

Rent gradient is a representation of decreases in rent with the distance from a reference point. The gradient is related to marginal cost of distance for every activity, that is why bidding rent is influenced by distance. The land rent gradients or bidding rent for the following activities are given below:
Manufacturing: manufacturing use of land includes patterns around the city, outside as well as inside the city. Transforming raw materials into finished products, and then its transportation includes expenses incurred on it. The location of the land can depend on the need and demand for the product. The return which the developer of the factory or industry receives developing the products on that land including coat of production. He pays the highest amount possible. Mostly in metropolitan cities the industrial land is established outside the city. But it totally depends on the need of that product that the location of the industry will be closer to the city or at the outskirts.
Agriculture: agricultural uses of land conforms the patterns around or outside the city, that are the markets for the farm or agricultural goods. These goods have greatest demand and high transport cost too and they should be produced closest to the city. The return in monetary terms which a farmer receives for growing crops on a piece of land after including the cost of production is also taken into consideration. The farmer pays the highest possible price for the land. Land may be or may not be put into use. Agricultural land is generally at the outskirts of the metropolitan cities. The farmers can get land at much lower rent their as comparing to the inner city areas
Offices: the return which a developer shall receive for developing a piece of land for making office complex after including the cost of development taken into account, including the willingness of the people paying rent for its level of accessibility which is provided by its location. Offices are located at the interior of the city, as the employees live in the city itself.
Housing: actually, the bidding rent characteristics for housing purposes is same as the office purpose. But some norms change as it is for residential purposes. The return is received by the developer for developing that land including cost implied on its development. Land for housing purposes is in the city. The rent of the land used for housing depends on the location of the land.