In a market economy where land can be acquired or sold, the distribution of economic activities should not be random but the outcome of their respective capabilities to use land in the most productive fashion. According to land rent theory (or bid rent theory), land use is the outcome of the rent-paying ability of different economic activities, such as retailing, industry, and residence. The optimal location, where accessibility is at its highest, is usually the central business district (CBD). Every activity, including rural, would prefer this location, but they do not have the same capacity to afford the associated high rent.
By overlapping the bid rent curves of all the urban economic activities, a concentric land use pattern is created with retailing in the CBD, industry/commercial on the next ring, apartments farther on, and then single houses. This representation considers an isotropic space where features are uniform. In the real world, a set of physiographic (waterfront, hills, etc.), historical (tourism), and social (income, crime, amenities) attributes will influence bid rent curves.
When a city grows, more remote locations are being used, increasing the rent of most accessible places, inducing higher densities and productivity. This generally occurs by “expulsing” some activities outside and by attracting more productive activities. The outcome of this process becomes apparent with the construction of skyscrapers that allow for more space to be available and, consequently, more rent to be generated. Density and rent are closely related. The above representation considers a monocentric city but can be modified to apply to a polycentric city.