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 average traveling speed of the individual's commute
C. An increase in the number of households attempting to live in the area
D. An increase in the number of days an individual must commute to work

Answer 1

Answer:

B. An increase in the average traveling speed of the individual's commute.

Explanation:

Bid rent theory is related to the price and rent of the real estate, and how they are related.

This is clearly defined by the theory as geographical in nature clearly demonstrates that is basically related to city center.

This is defined by the gap as every person wants the house near to the city center, as and when the gap increases the price also increases.

Accordingly when the speed of individual increases to commute to the real estate the price will decrease, as low speed reflects higher distance and accordingly higher price.

In simple terms the price decreases when the travel time decreases and price increases with increase in travel time.