Land Rent and Land Use

Land use is determined by the rent-paying ability of different economic functions in urban areas, such as retailing, industry and residence. The optimal location, where accessibility is optimal, is the central business district. Every activities, including rural, would like to be located there, but they do not have the same capacity to afford this optimal location. Section 1 on the above figure, depicting the tolerance of economic activities to rent.

By overlapping the bid rent curves (section 2 on the figure) of all the urban economic activities a concentric land use pattern is created with retailing in the CBD, industry/commercial on the next ring, apartments farther on and then single houses (section 3). This representation considers an isotropic space. In the real world a set of physiographic (waterfront, hills, etc.), historical (tourism) and social (race, crime, perception) attributes will influence bid rent curves.

When a city grows, more remote locations are being used, making the rent of most accessible places increase, inducing higher densities and productivity. This generally occurs by "expulsing" some activities outside and by attracting more productive activities. Density and rent are closely related.