Chapter 1

Question 1

Pros and cons of living in cities

Answer 1

• Pros - Innovation, production and trade = increase standard of living
• Cons – Noise, pollution, congestion, dirty
• Firms and people locate in cities because the obvious costs of being in a city are more than offset by subtle benefits of producing near other firms and people…

Question 2

Define urban economics

Answer 2

Urban Economics is the intersection between geography, economics and transport
Urban economics is about the location choices of firms and households
households always try to maximise utility.

Question 3

Define utility maximisation

Answer 3

individuals and firms seek to get the highest satisfaction from their economic decisions.

Question 4

Three conditions need to be satisfied for cities to exist:

Answer 4

1. Agriculture surplus – people must produce enough to feed themselves and the city
2. Productivity of urban workers – urban workers must produce something to exchange for food from rural dwellers
3. Transport system – facilitates the exchange of food and urban products

Question 5

How rural society became urban society :

Answer 5

1. Technology improved allowing for agriculture surplus to grow
2. Productivity of urban workers increased
3. Transport became more efficient

Question 6

List the 5 axioms

Answer 6

1. Prices adjust to achieve location equilibrium:
2. Self-reinforcing effect … create extreme outcome
   
   3. Externalities cause inefficiencies
3. Production is subject to economies of scale
4. Competition generates zero economic profit:

Question 7

Study the axioms in detail

Answer 7

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