Urban Economics Questions - Ranking of Real Estate Prices and Bid-rent Curve

This report ranks areas based on their real estate prices and distance from the central area, and explains why central locations attract higher real estate prices using the monocentric version of the bid-rent curve concept.

URBAN ECONOMICS
QUESTIONS
1

Table of Contents
INTRODUCTION...........................................................................................................................3
QUESTION 1..................................................................................................................................3
Ranking of area from highest to lowest based on their real estate prices....................................3
QUESTION 2..................................................................................................................................4
Monocentric version of Bid-rent Curve.......................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................1
2

INTRODUCTION
Urban Economics (UE) is basically involves the tools and techniques with the help of which
the issues related to urban area analysed such as education, public transit, housing, local
government finances etc. (Li and et.al., 2018). Firstly, the report will rank the areas mentioned in
city map based on their real estate prices and the distance from the central area. Lastly, the report
by applying the monocentric version of the bid rent curve concept will explain more central
locations attract higher real estate prices.
QUESTION 1
Ranking of area from highest to lowest based on their real estate prices
Rank Area (number only)
1: Most Expensive 1
2 2
3 6
4 7
5 4
6 8
7 3
8: Least Expensive 5
Interpretation:
The above ranking is basically done on the basis of estimating the prices of real estate
which indicate that area 1 named as Central business district (CBD) is most expensive area while
area 5 which is require railway transportation is least expensive. It is because CBD i.e., area 1 is
located in central and all the other areas which is closer to central location must be considered as
more expensive than the area which is far away from central area. The areas which is located in
centre of the city must have higher real estate prices. This means that a building, land and real
estate located in centre of the city must have higher prices as compared to others which make
that area more expensive (Andronie and et.al., 2021). Such an area is basically known as urban
area in term of economics. While the areas which is away from the central area where the people
need to use transportation facility such as railway, road etc. to reach central location.
3

Here, in the given question area 5 is least expensive as compared to area 3 besides both
require railway transportation. It is because area 5 is closer to CBD as compared to area 3 which
means the people need to spend less time and money on travels. Thus, area 5 is considered as
least expensive. This is basically based on the information given in the question that
transportation via train is cheaper than the travelling via roads. The above ranking is basically
done on the basis of two conditions such as real estate price as per central location and
convenience & prices of various transportation facility.
QUESTION 2
Monocentric version of Bid-rent Curve
The above diagram indicates that the rent and price of the real estate such as land and
building changes as per the change in the distance from central business district (CBD). As per
the Bid-rent theory, the prices of the real estate decreases when the distance from the CBD
increases. For example, in the above city map area 1 is closer to CBD thus the price of real estate
is higher and the area 5 which is far away from CBD but have low traveling cost is considered as
least expensive. The theory basically indicate that the land and real estate located closer to CBD
have high price as compared to other areas. This is because most of the industrial, residential and
retailing business are operated from central area. The central area has all the facility such as
shopping malls, metro, manufactures, online deliveries etc. which make that area expensive
(Chidi, 2019). Beside this the accessibility increases the potentials of the consumers more and
more and the impact of which the trade-off between accessibility and cost of land diminishes.
4

Along with that this theory is also affected by the availability and the prices of the transportation
facility.
For example, in the above map if the railway track serves only cargo train and not
passenger train than also it is advisable to commerce, individuals and manufacturers to locate in
area closer to 1 i.e., CBD. It is because this area is closer to river as well as roads which helps the
industries to reduce its supply chain cost as they can easily transport its raw material and
products through railways and seas which is also low in cost (Turner, 2019). The area closer to
CBD also helpful for companies to manage their business more prominently because most of the
workforce are available at central area only.
CONCLUSION
The report has concluded the ranking of area based on their distance from the CBD as well
as the cost of the travel. The report has also concluded the monocentric version of bid rent curve
concept to explain the reason why central locations attract higher real estate prices.
5

REFERENCES
Books and journals
Li, J. S. and et.al., 2018. Carbon emissions and their drivers for a typical urban economy from
multiple perspectives: A case analysis for Beijing city. Applied Energy. 226. pp.1076-
1086.
Andronie, M. and et.al., 2021. Sustainable cyber-physical production systems in big data-driven
smart urban economy: a systematic literature review. Sustainability. 13(2). p.751.
Chidi, C. L., 2019. Bid-Rent Theory and Urban Land Use of Butwal Urban Area, Western
Nepal. The Third Pole: Journal of Geography Education, pp.11-20.
Turner, M., 2019. The monocentric model in discrete space.
6