In economic geography, the concept that describes how price and demand for real estate change with distance from the central city is known as which theory?

• A. Bid-Rent Theory
• B. Von Thunen Model
• C. Central Place Theory
• D. Gravity Model

Answer: (A)

The idea being tested is how price and demand for real estate change with distance from the central city, captured by Bid-Rent Theory. This theory says that land users bid for locations based on how accessible they are to the urban core; the closer you are to the central business district, the higher the rent because proximity lowers transportation costs and increases customer or worker access. As distance increases, rents fall, leading to different land uses clustering near the center for high-access activities (like retail and offices) and more space-intensive or less transit-dependent uses moving outward, creating a gradual decline in land value with distance. The other models describe different urban patterns—Von Thünen focuses on agricultural rings around a market town, Central Place Theory on the hierarchy and reach of settlements, and the Gravity Model on interaction flows between places—none specifically explain the rent-demand gradient for real estate with distance from the city center.