What economic theory explains how real estate price and demand change with distance from the central business district?

• A. Bid-Rent Theory
• B. Metes and Bounds
• C. Long-Lot Survey System
• D. Township and Range System

Answer: (A)

Bid-Rent Theory explains how real estate price and demand change with distance from the central business district: land values are highest near the CBD because of superior accessibility and proximity to jobs, markets, and services, so firms and households bid more for nearby parcels. As distance from the center increases, transportation and time costs rise, reducing willingness to pay and causing land values to fall; this creates a gradient where different uses situate themselves at varying distances from the center. The other options describe methods for dividing and describing land parcels (metes and bounds, long-lot survey system, township and range), not how price and demand shift with distance to the CBD.