Which theory explains how real estate price and demand change with distance from the CBD?

Which theory explains how real estate price and demand change with distance from the CBD?

• A. Bid-Rent Theory
• B. Rank-Size Rule
• C. World Systems Theory
• D. Sustainable Development

Answer: (A)

The main idea is how land value and demand change as you move away from the central business district, driven by accessibility. Bid-rent theory explains this by showing that land users bid for the most convenient locations. Because being closer to the CBD means easier access for people and goods, rents are highest there and decrease as distance increases. Different land uses—office space, retail, housing—compete for proximity, producing a pattern where near-center locations command higher prices and demand, while farther-out locations are cheaper and attract different uses. Other theories don’t describe this local land-value gradient. The Rank-Size Rule relates to how city sizes distribute within a country, not how real estate prices change with distance from the city center. World Systems Theory looks at global cores and peripheries, not the internal spatial gradient of a single city. Sustainable Development focuses on balancing economic, social, and environmental goals, not the distance-based pricing pattern around a CBD. So, the bid-rent theory is the best fit for explaining how real estate price and demand change with distance from the CBD.

The main idea is how land value and demand change as you move away from the central business district, driven by accessibility. Bid-rent theory explains this by showing that land users bid for the most convenient locations. Because being closer to the CBD means easier access for people and goods, rents are highest there and decrease as distance increases. Different land uses—office space, retail, housing—compete for proximity, producing a pattern where near-center locations command higher prices and demand, while farther-out locations are cheaper and attract different uses.

Other theories don’t describe this local land-value gradient. The Rank-Size Rule relates to how city sizes distribute within a country, not how real estate prices change with distance from the city center. World Systems Theory looks at global cores and peripheries, not the internal spatial gradient of a single city. Sustainable Development focuses on balancing economic, social, and environmental goals, not the distance-based pricing pattern around a CBD.

So, the bid-rent theory is the best fit for explaining how real estate price and demand change with distance from the CBD.