Land: Economy

Outline of Chapter 6 Study Guide

This chapter is about land prices. What drives the price of land? We will learn about how  location theory helps us to understand land prices. I have also included a link to a nice little video on bid-rent curves that explains why land values differ.

Bid-Rent videoLinks to an external site.

Chapter 6 Outline

Location Theory

· Capitalization of land prices (Present value of future rents)

· Bubbles

Simple Models of Location Theory

· Closed-city case (No one can migrate)

· Open-city case (People can migrate)

· Displacement costs and rents

· Bid-rent curves

· Monocentric city

· Density gradients

Transportation and Land Values

· Relationship between transportation and displacement costs

· Benefits of better transportation (equation p. 135)

Taxing Land

· Land tax versus taxing improvements

· The case for a land tax

· Problems with a land tax