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In: Economics

A land acquisition specialist for a discount store chain said that when his firm decides to...

A land acquisition specialist for a discount store chain said that when his firm decides to enter a new market, it buys or leases the three best store locations in the area, uses the best one for its new store, and makes certain that the other two sites are used only for noncompeting purposes. Discuss this in terms of the text's explanation of bid-rent curves and natural zoning.

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Expert Solution

So, the bid rent theory refers to how the price and demand for real estate change as the distance from the central business district increases. And it states that different land users will compete with one another for land close to the city.

Natural zoning refers to the zoning techniques or methods used by the state to zone out natural resource areas in order to protect them from damage of mass usage, specially done in rural areas due to high environmental dependence of rural people on natural resources.

In the case above the store chain would want to open up business in area which is closer to the city as it will be easier for the company to approach customers and vice versa. The store chain would benefit more if it opens up its new store in the area close to the city or the central business district where it will then gain customers and maximize its profits. As we can see in the attached picture the best place to open manufacturing unit would be where the resources are i.e. near the natural zoning areas and the best place to open the retail shop ie new store would be the city center where the distance is minimized .

Rahul Sunny answered 2 years ago
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