Urban growth

Question 1

regional economic multiplier

Answer 1

1 / (1-b)(1-m)

b = consumption fraction out of income
m = consumption fraction of local goods

Question 2

three sector model

Answer 2

• output market
• labour market
• real estate market

Question 3

demand induced growth process

Answer 3

• Start: increases in output demand
• increases in quantity (short run)
• labour & RE demand curve shift to right:
  
  • wage and rent increase
  • production cost increases
• supply curve shifts to upward
• finally, equilibrium quantity adjustment (long run)

Question 4

Supply induced growth process

Answer 4

• Start: right shift in labour supply
• decreases in wage (short run):
  
  • decreases in production cost of output
• downward shift in output supply curve:
  
  • increases in quantity
• increases in output demand
  
  • increases in rent and real estate stock
  • finally, labour effective wage adjustment (long run)

Question 5

Demand induced growth 2- sustainable conditions

Answer 5

Nominal wage W must increase more than prices P
Elasticity of supply- larger increase in quantity and small price increase
Inelastic of supply-small increase in quantities and large price increase

Question 6

Supply induced growth 2

Answer 6

Elastic demand-
Higher quantities of output and employment
Slight decrease in wages and prices
Substantial expansion in property stock
Inelastic demand:
Output and employment rises slightly
Wages and prices fall significantly
Modest expansion of real estate growth