URBAN ECONOMICS

1. Price of land

a. Land rent - payment for the use of land to produce marketable services

b. Market value - present value of the stream of rental income generated by land

(1) Limited rental stream

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(2) Infinite rental stream

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• Use land rent (stream of payments) for the price of land

2. Land rent and fertility

• David Ricardo - price of agricultural land based on fertility (productivity)

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• Leftover principle - competition among farmers for land leads to landlords getting the leftovers (excess of total revenue over nonland costs)

3. Market interactions

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• Price of land depends on price of things land is used for

• Split tax - tax land and improvements at different rates

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- Encourages capital investment