Johann Heinrich von Thunen's Model of Agricultural Land connects the theory of rent with spatial economics and economic geography.
The Thunen rings are based on the assumption that the farmer will likely maximize economic rent from the farmland. The profit, therefore, depends on optimal use of land area and costs to transport. It is expressed as:
L=Y (P-C) - YDF
Where:
L stands for Locational rent
Y stands for Yield
P stands for Market price of the crop
C stands for Production cost of the crop
D stands for Distance from the market
F stands for Transport cost
The formula shows how locational cost decreases as distance to the market increases. Thus, the amount a farmer likely pays will be lower and the price of market will eventually decrease.
