lecture 14 Flashcards
what is a fundamental part of a citys infrastructure
transport
why do cities exist
scale economies:
- production of goods and services are efficient
- firms employ a large number of people, who want to live close
Agglomeration economies
- firms benefit from being close to each other
- easier to find qualified workers at a reasonble cost
Knowledge spillover:
-engineers will share their ideas improving innovation
Transport cost:
locate close to their customers to save on transportation cost –> consumer like to live close to other consumers –> save on more trvael costs
why is travel essential in terms of a city
trvael is costly (time, money)
- so where one locates is dependant on the expected cost of traveling to and from destinations
what common features can travel cost help you understand about size and position of housing in a city
concentration of tall bulding in the centre:
size of dwelling increases as you away from the centre
unit price of land decline as one moves away from the centre
what is the monocentric model?
explain sylized facts, orginated from Alonso, Muth and Mills in1960
- city structured are a central business district (cbd)
households live outside from CBD and commute there
what are the assumptions of the monocentric model
- all jobs are within CBD
- city has a network of radial roads: everyone can travel to work in a striaght line
- communting is costly(money)
- -> cost of commuting is proportional to the dsitance from CBD
- -> identical travel mode for everyone
households are identical
- housing space
- fodd consumption
fixed total population
whats the budget and utility function in the monocentric model
𝑦−𝑡𝑥=𝑝𝑞+𝑐 Budeget
𝑈=𝑣𝑞+𝑐 utility
what does household utlity mean
𝑈=𝑣𝑞+𝑐
as V is incterase and concave(someone is happy with more space, but utility is lowered for an additional unit
do you include quality of households in terms of the monocentric model
only the size of dwellings, the wuality is ignored.
also households are made of land, so no construction costs
what is the spatial equilibirum condition
households get the same utility level at any location
–> households are indifferent as to the distance from CBD they live at
SO SOMEONE CAN LIVE AT A LOCATION AND WANT TO MOVE ELSEWHERE
What is the implication of the spatial equilibrium
x is distance from CBD
welfare must not chanfe with X, but those who live close get lower commuting cost so higher net income
individials who live further away from CBD, what are they compesated by
they can afford greater housing space, where q increases with x.
q = units of dwelling space
how can individuals with lower net incomes afford larger dwellings
a square meter of housing is cheaper the further it is from CBD
in terms of size and price of dwellings, what does the model predict
size of dwelling increases with disntance from the centre, while unit price of dweliing space decreases
what does the spaitial equilbirum show
- price of dwellings per square meter decreases with distance from CBD
- size of dwellings increase with distance from CBD
- population density decreases with distance from CBD
