Question

According to the bid-rent model, which of the following changes in the model's underlying assumptions would most likely result in a decrease in rents for properties closest to the central business district (CBD)?
a. an increase in an individual's hourly wage
b. an increase in the number of households attempting to live in the area
c. an increase in the number of days
d. an individual must commute to work
e. an increase in the average traveling time of the individual's commute

Answer 1

Answer:

e. an increase in the average traveling time of the individual's commute

Explanation:

The bid-rent model refers to a theory that states that the price and demand for real estate is influenced by the distance between the residence and the central commercial deficit. This is because people tend to prefer residences near the city center, because it can increase the profitability of commerce. According to this rationalization, this model asserts that an increase in an individual's average travel speed may cause a decrease in property rentals closer to the central business district.