why do cities exist? Flashcards
Name the 4 key reason for a growing city
1) comparative advantage
2) scale economies in transportation
3) scale economies in production
4) agglomeration
explain shortly comparative advantages
produce goods at a lower opportunity costs than other-> specializing in thegood where you hold comparative advantage
leading to trade between the regions
explain shortly scale economies in transportation
the costs per unit increase as the volume of the good transported increase
leadingto development of trading cities and also
increasing demand for land around the marketplace -> land price goes up
explain the scale economies in production
average cost of producing good decreases as the volume ofinput increases
reasons: specialize + invisible inputs
leading to the development of factory cities (bc production costs decrease and consumer living near factory will stop producing lothes at home)
explain agglomerative economies
name the 2 types
cost savings when firms + ppls locate near each other
localization, urbanization
explain localization agglomeration
results?
firms in the same industry cluster in same location
prod. costs decrease as they benefit from shared infrastrucutre, special
labor pool & knowledge spillover
explain urbanization agglomeration
results?
firms in different industries cluster in the same location
produ. costs decrease bc benefiting from shared infrastructure
+ large pool of workers and consumer
main message of Central Place Theory?
resulting in 2 main questions
5 assumptions
predicts the number, size, scope of cities based on scale ec. in produc., per capitademand and transp. costs
how many cities will develop, why are some cities larger than others?
1) uniform pop. density, 2) no shopping externalities, 3) omnipresent input (all available at all loc. at same price) 4) uniform demand (does not vary with size), 5) number of stores
number of stores, on what do they depend?
scale economies related to demand
jewellery high, CD’s moderate, Pizza low
assuming that all inputs are ubiquitous & location is chosen to minimize travel costs
other statements of CPM
3 Stück
1) hierarchical systems of cities
2) the larger the city the higher the variety of goods
3) each city imports goods from higher order cities + export goods to lower order cities
3 lessons from CPM
1) large means few (small nb of large cities, large nb of small cities)
2) shopping paths (consumers travel to bigger cities to consume same size)
3) diversity + scale economies (diff. scale economies relative to per capita demand = different market area)
what are the 3 key factors determining the size of a city/market according market-area analysis ?
1) Economies of scale
2) Transportation costs
3) per capita demand
explain impact of transportation costs
the farther away the consumers are from a store, the higher the transportation costs, increasing the final price of the good for the consumer
the higher the transportation costs, the less likely consum. will travel
leading to shrinking markiet area
explain impact of high Econmies of scale
products with high EOS must be produced in large quantity ->mostly offered in larger cities where demand is enough to cover the production costs
CPMS definition
model states that cities develop as “central places” that provide goods and services to surrounded areas.
market-oriented, meaning that the businesses locations are determinded
by the location of the customers trying to minimize the transportation costs for the costumers
explain impact of per capita demand
the higher the demand, the more succesfull are the sellers, leading to larget market-area
good with lower demand only available in fewer cities
3 Key insights of CPM
1) Size and variety: the largert the city, the greater the variety of goods
2) spatial distrubution: larger cities spaced farther apart than smaller ones
3) trade patterns: hierarchical patterns between cities (->smaller cities export good to larger cities while larger cities export more specialized goods to smaller cities an dother large cities)
relaxing the assumptions regarding shopping externalities and demand variation
- shopping externalities like comparison shopping or buying complemantary goods could lead to more larger cities and fewer small cities bc consumers are more willing to travel
- demand variation could disrupt the hierarchy of central places
reasons for the limited growth of a city
6 Stück
1) rising costs
2) ressource scarcity
3) infrustructure strain e.g. water supply, transportation system, pollution,..
4) negative externalities
5) decentralization trends
6) Central place theory -> size of a city is limited by the demand for goods and services with varying EOS and market reach
Importance of Urban Hierarchy in Regional Economy
4 aspects
1) efficient provision with goods and services
2) specialization and division of labor (leading to overall efficienc of the economy)
3) EOS and innovation bc the incentive to invest into a larger city to EOS and competetive advantages and therefore innovation
4) growth and development: larger cities attract investment, jobs and innovation also often radiating to smaller cities nearby
CPT deals with 3 types ofeconomic activities -which one?
is the CPT applicable to all of them?
1) market-oriented firms, choosing their location based on the demand where the highest goal is minimize transportation costs for the customers
2) ressource-oriented firms: location closet o raw material sources
3) input-oriented firms, location near suppliers to minimize transportation costs
not applicable to all of them, only market-oriented. otherwisewill disru
disrupt the urban hierarchy
Industrial cluster + Urban sys
- industrial act tend to cluster together (industrial parks, small towns, major cities)
- hierarchy of clusters:more specialization in S clusters, more ativities in L clusters)
- EOS ->produc. costs decreasing->efficiency increasing->profits increasing->attracting more firm in the area
