Chapter 1 - cities in a regional economy

Question 1

• Increase in employment generate two sorts of agglomeration economies that provide upward pressure to increase worker utility

Answer 1

1. Agglomeration economies in production:
   • As discussed in Chapter 4, several benefits including:
   • Share suppliers of intermediate goods
   • Common labour pool
   • Skills matching
   • Knowledge spill overs
   • They all increase labour productivity and wages … thus higher labour utility
2. Agglomeration economies in consumption
   • An increase in population increases the variety of consumer goods, this
   increases consumer utility

Question 2

explain agglomeration diseconomies

Answer 2

• Agglomeration diseconomies

1. Commuting and housing cost
   • Building up (land cost) or building out (commuting cost)
2. Disease
   • Cities used to reduce life expectancies!
   • Problems with water and sanitations
   • Now it is the opposite … but density can create challenges
   • Developing Countries can experience urban challenges …
3. Pollution
   • Air, water, light, noise all increase with population

• All of the above decrease labour utility…

Question 3

trade-offs with city size all graphs learn

Answer 3

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Question 4

What are the causes of economic growth?

Answer 4

1.Capital “deepening” (capital investment)
•Not salaries of people … but infrastructure
•Infrastructure is then used to increase productivity

2.Increases in human capital
•Knowledge and skills acquired through formal, and informal learning
•Mentorship, internship, etc.
•The more skills you have, the more you can share and the higher your productivity and
the higher your income
•PS. Higher income = higher GDP per capita

3.Technological Progress
•Obvious that technological development leads to improved productivity and
ultimately an increase in income per worker

4.Agglomeration economies
•Physical proximity brings about the benefits discussed

Question 5

learn innovation slides

Answer 5

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