Suppose that residents live in a linear monocentric city with absentee landlords. All residents are identical and have t

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Suppose That Residents Live In A Linear Monocentric City With Absentee Landlords All Residents Are Identical And Have T 1 (33.43 KiB) Viewed 12 times

Suppose that residents live in a linear monocentric city with absentee landlords. All residents are identical and have the following log-linear utility function: U(z, h) = alogz + (1 - a)logh where h and z represent consumption of land (housing) and non-housing goods. Here we assume that urban residents consume land directly. The budget constraint of a resident residing at the location with a distance x from the CBD is given by w-tx=hR(x) + z where w and represent income and commuting costs per period, R(x) is the housing price at x. Population in the city is given by N. Agricultural land rent is given by RA 1) Derive the optimal level of hand z using the direct approach (bid-rent approach). Please write down your solution in details. (30¹)