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

Question

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

BlackTom AI · Accepted Answer

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, encouraging more productive use of land inside the city where demand for housing remains strong. This tends to push up land prices used for housing, all else equal.
- Caveat: If the city imposes price controls, caps, or strict zoning that limits conversion of agricultural land to residential use, the pass-through to living-space prices could be dampened.

2) Rent per square foot of land
- Likely effect: Increase in agricultural land rent could raise overall land rents, including urban land rents, since land is scarce and farmers may respond by selling or leasing land at higher prices if adjacent urban demand remains high.
- Mechanism: The opportunity cost of land use increases across the board; landowners may charge more for any parcel that could be used for non-agricultural purposes, including housing, commercial, or industrial use.
- Caveat: If the policy environment strongly separates agricultural land markets from urban land markets, or if land reallocates internally within the city to agriculture while urban uses are constrained, the effect on urban land rents may be muted.

3) Home size
- Likely effect: Potential decrease in average home size if land rents rise and incentives shift toward higher density or smaller units to maintain affordability and maximize number of units per acreage.
- Mechanism: When land becomes more costly, developers may prefer building more compact housing or increasing unit counts per parcel. If height or density constraints exist, the effect could manifest as smaller average dwelling sizes rather than larger ones.
- Caveat: If policy encourages large homes or single-family lots and zoning remains permissive, home sizes could remain unchanged or even increase for premium housing near desirable areas.

4) Building height
- Likely effect: Potential increase in building height as a strategy to cope with higher land rents and limited space, allowing more floor area per unit of land.
- Mechanism: Elevating height increases usable floor area per parcel, partially offsetting higher land costs. In a Closed City, where vertical development may be favored or constrained by structural and safety policies, the actual outcome depends on regulatory frameworks.
- Caveat: If height limits are strict or if construction costs rise nonlinearly with height, the incentive to heighten may be weakened.

5) Density
- Likely effect: Density may rise as a response to expensive land, enabling more people and uses per square kilometer of land.
- Mechanism: Higher land rents push for more efficient land use. When feasible, refurbishing or building up rather than out is favored to spread fixed costs over more units.
- Caveat: Zoning, infrastructure, and social preferences can cap or slow density increases even when land costs rise.

6) Physical size of city (distance from edge to city center)
- Likely effect: The physical footprint could contract over time if expanding outward becomes less attractive due to rising agricultural rents and higher land costs for peripheral expansion.
- Mechanism: If peripheral land becomes more expensive or less attractive for development, growth may concentrate inward, reducing outward expansion and thus limiting the city’s physical reach.
- Caveat: Transportation networks, regional policy, and incentives to sprawl or redevelop inner areas can counteract this contraction.

7) Population of the city
- Likely effect: Population growth may slow or revert toward the center if outward expansion becomes economically unattractive, but inward consolidation could maintain or even increase density without necessarily increasing population.
- Mechanism: Higher land rents raise the cost of new housing on peripheral zones, potentially slowing net in-migration or keeping population more stable unless inner-city housing expands rapidly.
- Caveat: If the city compensates with more efficient housing (higher density) and improved amenities, population could still rise even with higher land costs.

8) Utility level in the city
- Likely effect: The impact on measured utility is ambiguous and depends on which components of utility are valued (housing affordability, access to amenities, travel costs, environmental quality).
- Mechanism: If housing becomes more expensive and crowded, measured utility could decline for many residents unless higher density and better allocation improve overall welfare. Conversely, if land-use efficiency increases and the city offers better services per unit area, utility could improve for some households.
- Caveat: In a Closed City with fixed budgetary constraints, government provision, or subsidies, the net effect on overall utility will hinge on policy responses and distributional impacts.

Summary of overall intuition
- Across several variables, higher agricultural land rents tend to push land prices upward for potential urban uses, incentivize higher density and vertical development to maintain housing supply, and potentially curb outward physical expansion.
- The precise outcomes for home size, density, height, and quantity of urban activity depend crucially on zoning policies, building codes, infrastructure, and the city’s ability to adapt to rising land costs.
- Because a Closed City confines external exchange, some of the usual market-clearing adjustments may be slower or more policy-driven, amplifying the role of local planning in determining the final outcomes.

If you want, I can adapt this analysis to specific assumed policy constraints (e.g., fixed zoning, maximum height limits, or a given housing subsidy) to forecast more precise directional changes for each item.

ECO333H1 S LEC0101 What happens if agricultural land rent increases? Closed city

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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