What is the geographical economic theory that explains how the price and demand on real estate changes as the distance toward the CBD increases?

• A. Bid-Rent Theory
• B. Von Thunen Model
• C. Commodity Chain
• D. Carrying Capacity

Answer: (A)

This question is about why land value and demand decline as you move away from the city center. Bid-rent theory explains this pattern by arguing that different users are willing to pay more for proximity to the CBD because it lowers transportation costs, improves access to markets and labor, and boosts visibility and foot traffic. Because nearby land is more valuable for activities like offices and retail, rents and land prices are highest at the center and fall with distance as these accessibility advantages erode.

Different users have different rent gradients, which is why downtown areas typically command the highest rents while outlying zones are cheaper. Transport improvements or zoning changes can alter the gradient, but the basic idea remains: proximity to the center drives higher price and demand.

The Von Thünen model is about agricultural land use in rings around a market, focused on transportation costs for farming, not urban real estate price changes near a city center. Commodity chains and carrying capacity cover different concepts—global production networks and ecological limits, respectively.