6_Monocentric model: location choice of rich and poor Flashcards
What key question does this model explore regarding income groups and city living?
It examines whether the rich or the poor will live in central cities based on bid-rent functions and commuting costs.
What are the two income groups considered in the model?
𝑦𝐿: Low-income (‘poor’) group
𝑦𝐻: High-income (‘rich’) group
How do commuting costs differ between the two groups?
𝑡𝐿: Commuting cost for the low-income group
𝑡𝐻: Commuting cost for the high-income group
How does housing consumption vary between the two groups?
ℎ𝐿: Housing consumption for the low-income group
ℎ𝐻: Housing consumption for the high-income group
How does bid-rent function influence where different income groups live?
The group with the steeper bid-rent curve will outbid the other for central locations.
What factor determines if the rich or poor live in the city center?
The relative importance of commuting costs versus housing consumption preferences.
What does the bid-rent curve tell us about the location of the rich and poor?
The group with the steeper bid-rent curve will occupy the central city.
What happens if the poor have a steeper bid-rent curve?
They will live in the central city since their bid-rent is higher close to the CBD.
What happens if the rich have a steeper bid-rent curve?
They will live in the central city because they are willing to pay more for proximity.
What determines the slope of the bid-rent curve for different income groups?
The ratio of commuting cost to housing consumption:
𝑡𝐿ℎ𝐿>𝑡𝐻ℎ𝐻⇒Poor live in central cities
𝑡𝐿ℎ𝐿<𝑡𝐻ℎ𝐻⇒Rich live in central cities
What happens if the rich and poor have the same commuting cost?
The location decision becomes uncertain; we need more assumptions to determine who lives where.
What does point 𝑋∗ represent in the bid-rent model?
The distance where the rich and poor pay exactly the same price per square foot.
How does the normality of housing as a good affect location decisions?
If housing is a normal good, then rich households consume more housing (𝑝ℎ𝐻>𝑝ℎ𝐿), leading them to prefer suburban locations.
If commuting costs are the same for both groups, where will the poor live?
The poor will live in the central city since they consume less housing and bid more per square foot.
Why is it unrealistic to assume equal commuting costs for rich and poor households?
The largest component of commuting costs is the opportunity cost of time, which is higher for the rich.
income should correspond to, in general, higher-commuting cost
What assumption must be made to generalize location decisions for rich vs. poor?
We need to consider differences in commuting costs and housing preferences between income groups.
What does the derivative of bid-rent function with respect to distance tell us?
It shows how the bid-rent changes as distance from the CBD increases.
How do commuting costs and housing consumption vary with income in the bid-rent model?
Higher-income households may have different commuting costs and housing consumption, affecting the slope of their bid-rent curves.
What is the formula for the income elasticity of housing consumption?
𝜀_h_y = (d_h/h) / (d_y/y) - it represents the percentage change in housing consumption due to a percentage change in income.
What is the formula for the income elasticity of commuting costs?
𝜀_t_y = (d_t/t) / (d_y/y) - it measures the percentage change in commuting costs as income changes.
What happens if income elasticity of housing consumption is greater than income elasticity of commuting costs (𝜀_t_y < 𝜀_h_y)?
Households prioritize increased housing consumption over reducing commuting costs, leading to the poor living in central cities and the rich in the suburbs.
What happens if income elasticity of commuting costs is greater than income elasticity of housing consumption (𝜀_t_y > 𝜀_h_y)?
Households prioritize reducing commuting costs over increasing housing consumption, leading to the rich living in central cities and the poor in the suburbs.
What does the bid-rent curve look like when 𝜀_t_y < 𝜀_h_y?
The bid-rent curve of the poor is steeper, and they occupy the central city, while the rich reside farther from the CBD.
What does the bid-rent curve look like when 𝜀_t_y > 𝜀_h_y?
The bid-rent curve of the rich is steeper, meaning they occupy the central city, while the poor reside in the suburbs.
In the monocentric model, what determines whether people live in the city or suburbs?
Whether residents prioritize reducing commuting costs or increasing housing consumption as their income rises.
What happens if residents prioritize cutting commuting costs as their income rises?
The rich will live in central cities.
What happens if residents prioritize increasing housing consumption as their income rises?
The rich will live in the suburbs.
Historically, where have low-income households in the U.S. tended to live?
Closer to downtown.
What does the U.S. pattern suggest about high-income households?
They prefer buying bigger houses in the suburbs rather than saving on their commutes.
What are some alternative explanations for the U.S. pattern of low-income households living downtown?
Quality of public services, automobiles, and historical racial segregation.
How do location patterns in large cities in other countries differ from the U.S.?
High-income households often live in central cities.
Why do high-income households in some countries prefer central cities?
They may prioritize shorter commutes, and many European cities were built before automobiles, making them harder to navigate by car.
According to the monocentric model, how does a dual-earner household’s location compare to a single-earner household (assuming same income)?
A dual-earner household will locate closer to the CBD than a single-earner household.
How does a household with more children tend to locate compared to one with fewer children (assuming same income)?
A household with more children will locate farther from the CBD.
