GEOG 130 Lecture Notes - Lecture 15: Economic Rent, Location Theory, Ron Herron
Levels of Economic Activity
Primary activities: (farming, fishing, forestry, mining, etc.) involve harvesting
resources directly from the land/water without modification
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Secondary activities: (manufacturing, food processing, steel mills, etc.) involve
creating something new by converting primary resources into higher valued
goods
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Tertiary activities: involve moving, selling and trading goods produced at the
first two levels, as well as professional and financial services (banking,
investment)
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Quaternary activities: involve information processing (assembling, processing
and transmitting) and intellectual services (management and
academic/education)
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Competition for Land
Different activities compete for the use of any location
It isn't possible for all activities to be carried out at their economically
optimal location
How do we determine the most appropriate use for a particular
piece of land?
Land is generally assigned to the use that generates the
greatest profits
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We can determine a hierarchy of land uses based on relative
profits
□
The greater the profits generated by a particular use, the more
that use can afford to pay for the land
Ceiling rent is the maximum amount that a given use can
pay
®
□
§
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Rent-paying abilities of different land uses
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Urban Patterns and Structures (pg. 1 -50)
Tuesday, November 29, 2016
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The premise of location theory
The competition among land uses, a competition fought according to rent
paying abilities, results in a spatial patterning of those land uses
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Economic rent
This premise is added to the concept of economic rent - which explains
why land is or is not used for production
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Land is used for production if a given land use has an economic rent
above zero - which means that there is some profit to the be made in
cultivating or using the land
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Economic rent formula:
R = E (p-a) - Efk
§
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R = rent per unit of land
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k = distance from the market
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E = output per unit of land
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p = market price per unit of commodity
§
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Document Summary
Primary activities: (farming, fishing, forestry, mining, etc. ) involve harvesting resources directly from the land/water without modification. Secondary activities: (manufacturing, food processing, steel mills, etc. ) involve creating something new by converting primary resources into higher valued goods. Tertiary activities: involve moving, selling and trading goods produced at the first two levels, as well as professional and financial services (banking, investment) Quaternary activities: involve information processing (assembling, processing and transmitting) and intellectual services (management and academic/education) Different activities compete for the use of any location. It isn"t possible for all activities to be carried out at their economically optimal location. Land is generally assigned to the use that generates the greatest profits. We can determine a hierarchy of land uses based on relative profits. The greater the profits generated by a particular use, the more that use can afford to pay for the land. Ceiling rent is the maximum amount that a given use can pay.
