It's a basic question of economics: those with wealth could afford to buy land, and did. The poor people couldn't afford to do so, and during this time villages and towns were relatively small and provided few employment opportunities-rather, there wasn't a large enough market to create enough jobs to go around. So, the peasants needed places to live and employment. The wealthy needed workers for their land. It was an economic exchange: landowners allowed peasants to live on their land in exchange for labor. The peasants were required to also pay some type of "rent," though this was usually done through gifts "in kind" rather than actual cash. In turn, the manor lord would give his peasants protection from outside threats.
The system collapsed because manor lords began to realize that free laborers were more willing to do the necessary work to turn a profit if they were there by free will, had a share in the profits, or were allowed to use their free time to sell their services to others. Also, as exploration and trade expanded, there were more work opportunities in the larger towns and at sea.
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feudalism
It's disheartening to come across such medieval thinking in this modern age.Medieval art work often centered around religious themes.
Feudalism emerged as a result of the decentralization of the European empire. This was a system for structuring society around relationships derived from the holding of land in exchange of service or labour.
Feudalism in Europe began shortly after the fall of the roman empire. You see, after Rome was conquered, a lot of people fled the city and began to form groups in order to gain protection. These groups will eventually form kingdoms (although it will probably be a good idea for you to review feudalism vs. manorialism.) Remember that the Roman Catholic Church also began gaining power around this time.
A medieval town is simply a town that was around during the Middle Ages, several hundred years ago. A Manor is a Grand house that's home to someone wealthy.