Quiz 2 to Midterm Flashcards
What are the local public goods households look at when choosing location?
Parks
Security
Schools
What are the 3 non-rent factors in housing decisions?
Amenities
Neighbours
Public Goods
Why are neighbours important to making housing decisions?
Social interactions:
- Job opportunities
- Peer groups for kids and adults
What are 3 reasons households segregate?
Fiscal sorting
Lifestyle preferences
Race & language
Why does fiscal sorting happen?
Bundle of public goods & amenities
Cost of that bundle (property taxes)
Why do race and language matter for household segregation?
Access to work
Socialization
What kind of amenities are race and language considered?
Race and language are considered environmental amenities.
What kind of decision-making does collective choice create?
Majority rules
Is majority-rules choice efficient? Why or why not?
No, but it may get around certain externalities.
Inneficient: not Pareto optimal for non-median voters.
What are 3 things that neighbourhood sorting allows?
- “choice in demand”
- diversity of neighbourhood type
- poverty cycle
What does neighbourhood sorting do to poor neighbourhoods?
Poverty cycle:
Since property taxes are kept in each neighbourhood, poor residents with lower-valued houses provide lower revenues, resulting in worse amenities, leading to lower property values, and even worse amenities.
What happens when neighbourhoods have a variety of income levels and property values?
- wealthy subsidize poor * in their neighbourhood *
- which results in sorting
What are the neighbourhood externalities relevant to children?
Mentors
Peers
School
What are the 4 neighbourhood externalities relevant to adults?
Crime
Information (i.e. job opportunities)
Social
Spillover
What is the difference between property tax and head tax?
Property tax = t * (assessed property value)
Head tax = x * (# of humans)
What is the implication of using property value in tax?
The rich subsidize the poor * in their neighbourhood *.
What does CMA stand for?
Census Metropolitan Area
T/F: Census tracts cover the entire country
F: they only cover the Census Metropolitan Areas
Why will flexible technology firms outbid fixed technology firms when it comes to rent?
Fixed technology firms only have the budget effect, whereas flexible technology firms also have the substitution effect, so they can afford to pay more rent.
T/F: this isoquant represents von Thunen
True! This represents a fixed input ratio, which is a key vT assumption.
What does the residual principle say about land rents when other costs fall?
Ceterus parabus, profits always trend to zero, so rents will rise.
How will a farm subsidy affect surrounding wilderness?
It will get cleared for more land, because d* moves further out.
What will higher taxes do to land rents? Why?
Decrease them
Rent is residual, so it will get smaller.
y=C+rS+td
Why is land a special area of economics?
- externalities
- immobile
- heterogeneous
What are the 3 reasons that spatial analysis is important in land use modelling? (not the reason that land use is it’s own branch of economics)
BUS:
- BIASED & INNEFICIENT results if ignore spatial interactions
- Land is UNIQUE
- SPATIAL research
What will happen to the bid-rent line if S is held constant?
Since t is constant in bid-rent, there will be no change in slope, and it will be a straight line like vT.
How is the slope of the bid-rent curve affected if it’s assumed households obey the law of demand?
Since demand increases as price decreases, the slope will decrease at a decreasing rate * as rent increases *.
What are the 4 similarities between vT and bid-rent?
Similarities:
- monocentric
- homogenous
- t vs r
- amenities homogenous or missing
