What is an example of the Bid-rent theory?
The major hotel downtown in my city charged a lot more for people who had lost power in our recent ice storm than did outlying hotels and motels.
http://en.wikipedia.org/wiki/Bid_rent_theory
The Bid-rent theory is an economic principle that explains how the price and demand for land varies with its proximity to the city center. It suggests that land closer to the city center has a higher demand and, therefore, a higher price compared to land further away.
An example of the Bid-rent theory can be observed in urban areas where you can observe how land use patterns change with distance from the city center. Let's take the example of a residential neighborhood and a commercial district:
1. Residential Neighborhood: In a typical city, you will notice that residential areas or neighborhoods are found closer to the city center. This is because people prefer to live near their workplaces, schools, and other amenities. As the distance from the city center increases, the demand for residential land decreases, resulting in lower rent prices. This can be observed by comparing the rent prices of apartments or houses in downtown areas versus those in suburban areas.
2. Commercial District: On the other hand, commercial districts or central business areas tend to be located in the heart of the city where foot traffic and accessibility are high. Businesses such as office buildings, retail stores, and restaurants prefer to be situated in these prime locations to attract customers and benefit from increased visibility. As a result, the demand and rent prices for commercial land are highest closer to the city center and gradually decrease as you move away from it.
To summarize, the Bid-rent theory explains how the demand and value of land in urban areas change with distance from the city center. This theory is useful for understanding urban planning, real estate pricing, and land use decisions.