Midterm 1 Flashcards
Agglomeration Economies
when locating close to other producers increases efficiency; one reason that cities exist
Scale Economies, or Economies of Scale, or Increasing Returns to Scale
when increasing inputs increases efficiency, thus producing more output per input at higher levels of inputs; one reason that cities exist
Pecuniary Agglomeration Economies
decrease the cost of inputs without affecting their productivity
Technological Agglomeration Economies
increase the productivity of inputs without affecting their cost
When Do Distance Economies Exist?
when the marginal increase in cost/km for another km of shipping is less than zero; c’(d) < 0
Critical Distance (d*)
differentiating TSC with respect to d gives the critical distance (d*) at which there is an extremum (minimum or maximum)
Retail Agglomeration
the concentration of retail stores, largely occurs due to consumers wanting to visit mulitple stores and limit shopping costs, as well as compare similar products
Urban Spatial Structure Model Assumptions
1) all of the city’s jobs are in the central business district (CBD) 2) the city has a dense network of radial roads, leading to the CBD 3) the city contains households which are identical in number of occupants (one), prefernces, and income 4) resident consue only two goods, housing and composite good 5) the city’s population is fixed and closed (no migration)
Spatial Structure Model: Optimal Consumer Choices
as distance (d) from CBD rises, housing price (p) falls and housing size (h) increases - housing expenditure (v = ph) depends on the magnitude of the changes; as distance from CBD (d) rises, composite good consumption (g) falls
Spatial Structure Model: Optimal Producer Choices
as distance (d) from CBD rises, land rent (r) falls, amount of land used (n) rises, and the caital to land ratio (k/n) falls - building height and population density fall; as distance (d) from CBD rises, amount of capital used (k) falls
Urban Distance (d*)
the point at which developer’s willingness to pay to develop housing on land (rH) is equal to farmer’s willingness to pay to for land (rF); at distances greater than (d*), (rH) < (rF), and that land is therefore farm land
Spatial Structure Modification: Adding a Highway
decreases commuting costs (t), and creating highway catchment area points further from the CBD, but with the same commuting costs (c) as points closer to CBD, therefore with the same housing price (p) and land rent (r)
Spatial Structure Modification: Dispersed Employers
dispersed employers add jobs outside of the CBD; the net incomes offered by dispersed employers will be the same as those in the CBD, after taking into account commuting costs
Spatial Structure Modification: Secondary Business District
creates wasteful commuting if an worker lives closer to one district but works in another
Spatial Structure Modification: Remote Work
switching to remote work, or “telecommuting,” leads to cities spreading out and becoming less dense
