What is the relationship between land rents and distance from the market?

The correct answer highlights that land rents are higher near the market due to transportation costs. This relationship is fundamentally rooted in economic principles related to location and accessibility. When land is situated close to markets, businesses and consumers benefit from reduced transportation costs for goods and services. Consequently, the demand for land in these accessible locations increases, leading to elevated land values and rents.

Urban areas, where markets and resources are concentrated, often experience higher land rents because of this premium associated with convenience and accessibility. Businesses are willing to pay more for space that allows them to reach customers quickly and efficiently, thereby driving up the rental price of nearby properties.

The principle of bid rent theory helps illuminate this concept. It posits that land users will bid higher amounts for land located closer to the city center or market, making such locations more expensive. Thus, as one moves further away from these central areas, transportation costs increase, and the economic incentive to pay higher rents diminishes. This leads to a general decline in land rents as distance from market increases, confirming that proximity to markets is a key factor in determining land value.