1. Von Thunen

2. Some Assumptions made by farmers on what they are
going to farm:
• A farmer is worried about two costs: 1. …and 2. … (of
course the farmer is worried about other things such has yield and climate and disease)
• … a farmer will grow a crop that will sell for more than
the land costs
• …Also considered is the distance to the market
• Farms that are located closer to their market tend to
select crops with higher transportation costs per
hectare of output, whereas more distant farms are
more likely to select crops that can be transported
less expensively.

3. A key element of competition and cost is - proximity to the
market.

4. Why does proximity matter:
• …direct costs of transport
• …perishability
• …risk of damage
• …technology can alter the equation
•…good agricultural land is is good for
different uses

5. Below is a simple scenario on how land will look like
depending on what is grown and assuming the Market
is at the geographic center. This is the theory developed
by Von Thunen.

6. The Scenario below shows how a river can change the
pattern.

7. Von Thünen Model
Von Thünen’s model shows how distance from a city or market affects the choice of
agricultural activity in (a) a uniform landscape and (b) one with a river.

8. How Geography can change the agricultural pattern

9. Von Thunen and Rent
• Economic Rent = (simple) depends on prices and
cost of output:
A. How much does it cost to make or grow and
B. How much should I sell it for?
Location Rent =
A. How much have I made,
B. how much is it going to cost to get it to market (freight
and distance cost),
C. therefore how much should I sell it for.
Von Thunen’s model was also incorporated into the concept
of how rent can be determined for land.

10. Bid Rent is a geographical economic theory that
refers to how the price and demand on real estate
changes as the distance towards the CBD increases.
…
This theory is based upon the reasoning that the
more accessible an area, the more profitable it is
going to be. When the cost gets too high certain land
uses drop out.

11. Von Thunen and Agricultural location

12. Look over these
next few
illustrations and see
if you can
understand them!

17. Real World Modifications:
• land is not uniformm – mts, rivers
• climate is not uniform
• soil and vegetation is not uniformm
• countries level of development
• foal costs
•Government Policies – eg. - Crow Rates (straight line)
– Government subsidy to try and reduce transportation
costs - discounts, build better and faster transportation
networks etc.
• Overall government subsidies to control output and
cost. To help farmers in hard economic times – eg.
Tobacco farmers in Ontario.

19. The End!