Questions
ECO333H1 S LEC0101 What happens if agricultural land rent increases? Closed city
Essay
In a Closed City, how would an increase in agricultural land rent change the following: price per square foot of living space rent per square foot of land home size building height density physical size of city (distance from edge to city center) population of the city utility level in the city
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Step-by-Step Analysis
The prompt asks about how an increase in agricultural land rent would affect a set of urban variables within a Closed City, but it provides no answer choices to evaluate. Below is a detailed, step-by-step analysis of how each listed variable could respond to higher agricultural land rents, along with the underlying economic intuitions and the role of a Closed City setting.
First, establish the intuition: agricultural land rent reflects the opportunity cost of using land for farming versus other uses. In a Closed City, where external land trade or migration is constrained, the internal allocation of land and housing investments respond to relative costs and policy constraints. Higher agricultural rents raise the opportunity cost of land that could be converted to urban uses, potentially shifting how land is allocated within the city and influencing incentives for density, height, and development patterns.
1) Price per square foot of living space
- Likely effect: Increase in agricultural land rent tends to raise the value of land that could be converted to urban uses. If agricultural land near the urban core is more expensive to retain as farmland, developers and landowners may bid up prices for residential land, raising the price per square foot of living space in central areas.
- Mechanism: Higher rural farmland rents increase the wedge between agricultural value and urban value, e......Login to view full explanationLog in for full answers
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