chap 1 & 2 Flashcards
What’s urban economics
geographical area containing a large no of ppl in a relatively small area
Metropolitan area
based on economic
and social interconnectedness of nearby
areas (e.g. linked by commerce or
commuting patterns)
City
based on administrative
boundary (also called municipality)
Opportunity cost
the value of that resource in its next-best
use
Marginal principle
A decision-making rule: choose the level of
an activity at which the marginal benefit
equals the marginal cost
example of marginal benefit
rent on the additional floor (declines
with height due to engineering – lift space,
floor space. So still increases but at a slower rate
example of marginal cost
additional construction cost for an additional floor
how does MB slope
downwards
How does MC slope
Upwards
nash equilibrium
no single individual has an incentive to change behaviour
* In the simple demand-supply framework, (Nash) equilibrium when demand = supply
assumption of Nash Equilbrium
consumers and sellers are price takers eg firm cannot move production to increase/decrease price. No player can benefit from unilaterally changing their strategy
why do prices adjust eg rent in a beach house and rent near the highway
prices adjust to achieve the same utility level in diff environment getting to live in both
pareto improvement
make at least one person better off without making anyone
worse off
pareto efficient
An allocation is pareto efficient if there are
no Pareto improvements
Pareto efficiency is obtained when:
– Firms are price takers
– No external costs and benefits (no externalities)
– Perfect information
