Land Use in a Free Market
Projecting the previous graphic on a flat part of the earth illustrates how land use is determined (albeit in a stylized way) if all players are allowed to bid freely. We must assume that the most intense business activities occur in the center, the earth is a flat featureless plain (there are no natural barriers like oceans or mountains), all land users are price takers in the classical perfect competition model, no input substitutions are allowed (can't substitute cheap labor for expensive land).
Imagine in the plot below the inner ring is the central business district (banks, government offices). The next ring is light industrial, the third is residential (the largest, not surprisingly), the fourth is heavy industrial, followed by agricultural in the outer ring.
