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QUESTION 12 Suppose that landowners have the power to restrict X the distance to the edge of the city, in order to increase the land rent they earn. Suppose that, with no restriction, the urban land rent function is given by r = 100-x, where x is the distance in blocks to the CBD. Suppose that agricultural land rent ra is equal to 20 The city edge X is 80

Now suppose that landowners can restrict X to a value of 65 blocks. When they impose this restriction, the urban land rent curve shifts up, with the new rent function given by r 105-x.Remember, the restricted urban areas become a rural place again. There is a loss by changing it back to rural areas, which is the red part in the graph. However, the gain is got by increasing the rent from r_0 to r_1, which is blue areas in the graph. 0 s and the gain area is by this restriction, which is The new X is 65 The loss area . The loss area There is a net (loss/gain)

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