Why are there cities Flashcards
Lesson 1
What is a city?
Areas of comparatively dense human activity; not political definition
What is the political definition of a city?
Particular jurisdictions that have taxing and policing power, big and dense
Are suburbs part of cities?
Yes, in the economic definition
Where is most human activity concentrated?
In a very small part of the earth’s land
Where is activity most productive?
Activity in cities is more productive
How does the size of a city impact productivity?
Activity in bigger cities is more productive
What is the relationship between wages and location?
Wages are higher in cities, specifically larger cities
Per capita income in metro areas vs. non-metro areas
US per capita income in metro areas is 35% above non-metro areas
Describe the difference of per capita income and location in developing countries?
In developing countries there is more pronounced difference; 80-100%
Why were cities and founded in the past?
Cities developed because they were good ports/railroad hubs or near natural resources such as coal deposits or gold
Describe the importance of natural advantages today
Cities with larger educated populations in US had only a .03 correlation btw. per capita income and miles from a body of water (Natural advantage matters, but not the whole story)
Based on Amenities why do people prefer big cities?
More stimulating, better entertainment, more interesting people, etc.
Why does the amenities theory not cover the whole story?
People not willing to take pay cuts in real wages in order to live in cities
What does the Talent Sorting explanation say
Most people are more productive in cities because more productive people move to cities
What is missing from the talent sorting explanation
Why do most talented people choose to live in bigger cities?
What is meant by ‘survival of the fittest’ in the context of firms?
Over time, really good firms put the really lousy firms out of business.
How does innate productivity affect firms?
Firms are born with differing productivity; some are really good and some are really lousy.
Why might average productivity be higher in NYC compared to other places?
Only the best of the best survive due to tougher competition.
What evidence contradicts the idea of tougher competition leading to higher productivity in big cities?
The distribution of productivity of firms in France shows little difference between big and small cities.
What does the ‘two thirds rule’ refer to in increasing returns to scale?
Output = side^3; Cost = side^2.
What is the relationship between doubling output and unit cost?
Doubling output reduces unit cost.
Define agglomeration economies.
Agglomeration economies are present if the presence of other human activity causes firms to be more productive.
What are the two types of agglomeration economies?
Localization: other human activity is other firms in the same industry
Urbanization: other human activity is just size and density of the city.
What is demand smoothing in relation to agglomeration economies?
- the practice of managing and manipulating product or service demand to maintain more consistent level. Such as the ability to switch between checkout lines, increasing overall productivity.
How do lower search costs relate to agglomeration economies?
They help avoid monopolies and create better matches, leading to higher productivity.
Fill in the blank: The presence of other firms in the same industry is known as _______.
localization
Fill in the blank: The size and density of a city contributes to _______ economies.
urbanization
