Before we begin… LAND RENT Land rent or land value decreases farther away from central markets Rent is higher closer to urban markets (BID RENT THEORY) Agricultural products that have INTENSIVE land use has HIGH transportation costs and in high DEMAND, are located closer to urban markets BID RENT THEORY Closer you are to the “best location” the more the “bid” is for the land Beachfront hotels Distribution centers closer to airport Retail stores inside of a mall

Johann Heinrich von Thünen (1783-1850) prominent nineteenth century economist. Pg. 350 Von Thunen’s theories are the beginning of location economics and analysis. As people began living in cities, he wanted to figure out how to best accommodate getting food to them. TWO IMPORTANT COST FACTORS: 1. The value of the yield (crop) per amount of land needed. 2. Location of farm to minimize cost of transporting product to market (the city.) Think about it: Where is land most expensive… near the city or far from it? What types of products are most expensive to transport?

Assuming the climate permits cultivation of two crops – “X” and “Y” - why might a farmer plant “crop X” if he is able to sell “crop y” on the market for a higher price? EASIER TO TRANSPORT! CUTS DOWN ON COST! $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Johann Heinrich von Thünen Factors considered when deciding on crop and location: Spoilage Weight Distance Locational Theory Question : Butter and cheese processing are more commonly found outside the milkshed? Why?

Dietary preferences of Germanic Europeans

Von Thunen Model Spoilage: What are some foods that spoil quickly? Weight: What foods/crops are heavy? Distance: Why does distance matter? Space: What type of ag needs more land? Costs!!! $$$$

Dairying, gardening, fruits/veggies would be CLOSER to urban market…WHY? Timber and firewood for fuel and building would be in 2nd zone…WHY? (*1800s) Mixed farming, commercial grain and orchards would be in 3rd zone Extensive cattle ranching would be located farther away…cheap transportation…animals can walk to city for butchering

How does relative location affect land-use patterns? Intensive land use near market Wood and perishable/Fragile products near market Extensive agriculture (grain/grazing land) at the periphery High profit needed to pay rent High (frequent) transportation to nearby market Low land rent or low transportation costs

Reasons Profitable options decrease with distance from the market Rent differences reflects different values of distance Production costs + Transportation costs = economic margin for a crop Greater the transport cost, the less rent a farmer can afford

Contemporary Variables More efficient transportation Transportation cost no longer proportional to costs Firewood not a factor for heating Technology has reduced perish-ability refrigeration

The Farmer’s Profit ECONOMIC RENT (R) = E (p-a) – E f k   Where: E = yield in units per acre p = market price per unit of output a = cost of production per unit per acre f = transport cost per unit per mile k = distance from the market in miles …and the following cost data from agricultural activities, determine the rent for each of the activities for each of the four distance zones (k = 2 miles, 4 miles, and so on).

Complete the Cost Data A($) E p f 2mi 4mi 6mi 8mi 10mi ________________________________________________________________________ Cotton .25 100 .60 .03 Wheat .45 125 .65 .02 Dairy .25 200 .55 .04 Corn .20 300 .30 .01 Vegetables .20 200 .70 .10

Environmental Constraints   Activity Temperature Precipitation Cotton Hot 30 - 55 inches Wheat Mild 15 - 55 inches Dairy Cool – Mild 25 - 55 inches Corn Mild – Hot 20 - 55 inches Vegetables Mild – Hot 20 - 48 inches