Bid-Rent Theory

IB SL

Bid-Rent Theory

• In order to have a good understanding of the way urban areas are likely to grow, it is important to have an understanding of Bid-rent theory.

• The diagram shows what various land-users are prepared and able to pay for good access to the CBD

Analysis

• It can be seen that commerce (in particular large department stores/chain stores) is willing to pay the greatest rent to be located in the CBD.

• The CBD is very valuable for them because it is traditionally the most accessible location for a large population.

• This large population is essential for department stores, which require a considerable turnover.

• As a result, they are willing and able to pay a very high land rent value.

• They maximise the potential of their site by building many stories.

Analysis

• They are willing to pay declines rapidly.• Industry is, however, willing to pay to be on the outskirts of

the CBD. • There is more land available for their factories, but they still

have many of the benefits of the CBD, such as a market place and good communications.

• As you move further out, so the land is less attractive to industry and the householder is able to purchase land.

• The further you go from the CBD, the cheaper the land. • This is why inner city areas are very densely populated

(terraces, flats and high rises), whilst the suburbs and rural areas are sparsely populated (semi and detached houses with gardens).

• This bid-rent theory explains one pattern of urban land-use that is also identified by Burgess' concentric ring model.

• The pattern is never as simple in reality. Today, out-of-town shopping centres and industrial sites have influenced the pattern.

Activity 1

1. What do you think the main reasons are behind this theory? Explain

2. Why can the Bid-Rent theory be seen as good for both human and physical reasons?

3. What could be considered as disadvantages for both people and businesses?